What a pickle.

Go to the file "Properties" (custom thingy) and de-select the setting "Read only",then you will be able to delete it. (ignore the "Are you sure you want to delete system files" warning and just keep pressing "yes",it sometimes asks about 3 times before it will actually do it.
Then Un-install the theme using the built in "Manager" app.
After this go to C:/system/skins (or E:/ if its saved to the mmc) and find the theme in the numbered folders,there will usually be a file (.txt or .mbm ) with the theme's name in the folder. Once you have found the correct folder go back and delete the
entire folder (again,ignore the warnings),then re-install the theme and all should be well.

While you are in there,you should delete
all folders that
do not contain an .mbm file. These are just old themes that were previously installed and not removed properley with the "Manager" app.