I'm having a related problem. Was able to delete the photo via FTP fine, but now it's leaving a 'ghost' space via the album view. Anyone know how that empty space can be removed now?? I've removed what residual information I could through the admin panel, but don't see an option to simply 'delete'.
You can see the problem [b]here[/b]
Just looked, and yes indeed, here's your culprit:
http://iowaunderground.com/zenphoto/albums/loqs-pics/BVP%20view%20of%20SF.JPG
The reason for the "blank space" might be a server memory limitation. See if you can get that bumped up to process larger images.