Furthermore, once the episode is removed right clicking on other non-downloaded Podcasts fails to show the Download option. After refresh the Download option is back. It strangely doesn't affect all Subscriptions.

Thanks for confirming. I do consider it an issue as several bugs haven been addressed with refresh issues. So although it doesn't bother me either I do consider it a bug as it lacks consistency that refresh shouldn't be required. Added as: http://www.ventismedia.com/mantis/view.php?id=7604

I can reproduce, but I don't really see the issue with needing to refresh in order to see the episode deleted.

When you remove a Podcast Episode (right click Remove) with the option to Show removed episode links enable the episode is removed from the Tracklisting. Refresh returns it. Instead it shouldn't remove the episode but gray out indicating the corresponding file was removed from the PC.

Tested on skinned 1358 on XP. Can anyone reproduce.