Yeah, I tried it last night and it just throws a bunch of errors on my 0.6+ wallet, but worked fine on a 0.5.x wallet.
I just tried it on my encrypted 0.6.2 wallet. The web interface tells me "deleted 1 transaction" and if I try again, "delete 0 transactions", but when I load the wallet up into the client, the transaction is still showing. Possibly because it's already confirmed though. I'll try with an unconfirmed transaction...
[time passes]
Yes, it works with bitcoin 0.6.2 and an encrypted wallet.
I made a transaction in my wallet, then quit bitcoin-qt and ran:
python pywallet.py --web
in a terminal, then visited
http://localhost:8989/ in my web browser, scrolled down to where it says:
Delete a key from your wallet:
copy/pasted the new unconfirmed transaction ID into the 'key' field, and clicked 'delete'.
It told me: "tx:[...] has been successfully deleted from /home/.../.bitcoin/wallet.dat, resulting in 1 deleted item".
I would guess that maybe you have some problems with your 0.6+ wallet, and so exporting and re-importing the keys is probably the best thing to do anyway.
Then when I ran bitcoin-qt again, the transaction was no longer showing at all. It's still on blockchain.info as an unconfirmed transaction, and I'm sure it will eventually confirm, at which point I will see it in my wallet again.