How are you planning to delete the books? If you do it from the device interface, then it cleans up everything except some files in the directory "Digital Editions". It doesn't delete any empty subdirectories used to store the books.
If you delete the book while connected to the PC, then the device will cleanup after disconnecting fro the PC. The cleanup is the same as deleting through the interface.
If you use calibre, it cleans up everything in the same way as the device. The only extra is that it will remove empty subdirectories when deleting the books and stored cover images.
And yes, if you are really interested in starting again, a factory reset as meeera suggests is the way to go.
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