1. I previewed a sequence and decided it wasn't worth doing any work on
1.1 I right clicked on the folder and selected Delete Folder and it warned me and I selected yes and it removed all the files
2. The preview still remained as the first image from the deleted folder and all the files in the folder remained on the right side of the pane
3. I switched to Lightroom to do some work on another sequence and returned later to LRT
4. The preview was still showing from the deleted folder
5. Not paying any attention, I clicked on auto transition for the folder. Not surprisingly LRT hung with a spinning cursor as it was trying to work on a non-existent folder

If a folder gets deleted, shouldn't any trace of the folder be removed?

You are right, thanks for the report.
I'll add a check for the current folder and ask the user to switch to another folder before deleting the current one as it's already implemented for the Move Folder and Rename Folder features.

Implemented in 6.0 RC1.