Any one have any ideas on this? It seems like such a basic feature that I am surprised that its not obvious and no one has responded either.
Please let me know if my question is not clear. Thank you.

But I am looking for a way that allows deleting an image from within the Image Gallery view. Is this possible?

If you are using the views support, you could just add a "Delete link" field (and "Edit link" wouldn't hurt either). It shouldn't display if users don't have access to it. If not using views, you can probably do it with a theme override/hook.

Ted