Here are my guidelines for deletion of registered users:

1. Has not logged on in 2 years.
2. Has not achieved sainthood.
3. Deletion only occurs two weeks after an email is sent to the user's address.

If the deleted user has any nodes (excluding reaped ones) then the homenode and username are permanently reserved.

My reasoning is that if a person picks the same name, then the new person will not be associated with the postings of the old one.

Along with any other present content, the homenode will contain a small message indicating that the user has been deleted on such-and-such a date.

I also like LiveJournal's practice of crossing out (or striking out) a username belonging to a deleted account.