Indeed until the launcher is tweaked to add a mechanism for character deletion this has been a source of confusion for many. However, you can simply use the old method of logging in via the web at:
https://play.istaria.com/
Although it clearly states "GAME LOG-IN THROUGH WEB SITE NO LONGER SUPPORTED" you
can login to manage you characters. It's the same place you end up by the method you describe, just a few less web pages and clicks to go through. I don't doubt it won't be long before the launcher shortcomings are fixed but with the Vista fix and new content it's easy to see why that hasn't been further up on the to-do list. Oh and welcome back medweasel. I trust your return to Istaria will be well worth the while