I still don't quite understand why 'four' is being repeated.

It's because you still have a key '4' with a value of "four" that you didn't remove from the hash. Perhaps an illustration. Your hash just after you delete the entry keyed by '2':

0 === zero
1 === one
3 === three
4 === four
[download]

Then you loop over the keys creating new entries. After the first iteration of the loop your hash looks like this:

0 === zero             # this one reassigned
1 === one
3 === three
4 === four
[download]

Second iteration:

0 === zero
1 === one              # this one reassigned
3 === three
4 === four
[download]

Third iteration:

0 === zero
1 === one
2 === three            # this one created
3 === three
4 === four
[download]

Fourth iteration:

0 === zero
1 === one
2 === three
3 === four             # this one reassigned
4 === four
[download]

See?