Warning do this at your own risk and it's for WMP8 for XP only.
it's built in.... but see
Microsoft's way and reason
or
go
Here
and read "Q: How do I turn off the Most Recently Used list within WMP?"
There you will find 2 reg files, one to permanently clear your system and WMP MRU menus and one to re enable it.
You may also want to go to WMP's Tools

ptions and clear the "Add items to Media Library when played" checkbox, if you're worried about other users on that box seeing your files. [Available on WMP8 and subsequent releases.]
If you feel lucky you can manually delete these registry keys:
[HKEY_CURRENT_USER\Software\Microsoft\MediaPlayer\Player\RecentURLList]
[HKEY_CURRENT_USER\Software\Microsoft\MediaPlayer\Player\RecentFileList]
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Another good util would be the
ListZapper from PC-Map but you have to log in to download it.