Merge of contacts and system users has been done some time ago. Now user management is directly connected with contact edit form, however still it's a separate system function.
Contact's record store the id of the user from user_login table. Deleting contact doesn't perform any action on the user account, but this user will loose some permissions, that are based on the contacts groups, etc.
To delete a user account you should deactivate it - click a little green dot in the user management.
You should never delete a user from user_login table. You can change it's login to something else, like deleted_<old_login>.
Then you'll be able to create a new user with the same login as previous.
Regards,
Adam
