I'm struggling with book management also. I'd really like the desktop app library to match the Reader library. Hopefully some day
In the meantime, I've discovered I can delete books in the I'm Reading section by deleting the file from the Kobo Reader icon on my desktop.
When you plug the Reader into your computer (I use a Mac) it treats the Reader as a virtual drive. That way you can drag books onto the icon so they can be synced to the reader. I click on the icon to open the virtual drive and delete any book files I don't want to show up on the Reader anymore, then sync. Voila!
Of course this also deletes them completely from the Reader.