Hi Shades, Brad's right; LaunchBox does not attempt to delete game files when deleting games. If it did this, there'd be all kinds of issues with Windows games that are installed, etc. I do have an item on my list though to allow deleting game files for ROMs or MS-DOS games, but I'm torn on whether that should be implemented or not.
Per the images, I believe 5.0 does indeed solve the duplicate images problem. Images are still not deleted unless you use "Clean Up Images", but the prior images should automatically be re-used when creating a new game with the same platform and title.