If you are running out of space - buy more harddrives (both running and backup of course); factor the pricing into your costs to doing business and adjust your prices accordingly for a rough estimation of buying new drive based on your rough shooting rate per job. Just like a film photographer needs to buy more film the digital should always keep ahead of storage space needs.
As for deleting them this really depends on your own views on what you should and shouldn't provide. If you are giving them a CD with resized print ready versions then your client won't have the RAW version of the photo that you retain (even if you don't shoot in RAW mode you should always be keeping an un-edited JPEG of the photo and not working on the master copy). This might be a pain in a weeks time if they come back for additional changes. Longer term it might become less of an issue (esp if you've provided them on CD to the client).
That said CDs get lost - or scratched - or broken. How long you retain the ability to be able to provide your clients with future copies of the work they paid for is really down to yourself.
I would say that rarer events (eg a wedding or family gathering) might warrant longer term storage as these are more likely to be photos clients might want access to at a later date (remember if they come back in the future wanting new prints that is more business for you). You may also consider handing over the RAW versions to clients for a fee - however in practice this is often a less than desirable direction for regular people - most having no understanding of the RAW process and many unwilling to pay for prints if they know they are getting the full digital content (even if they dont' know how to properly print many will skip prints and just take the digital - which will factor in to how you'd price up your packages).
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