I had the same question when I just opened my shop. I sell locally and all items listed on etsy are physically on display at my "real- life" shop.
I did not want to look like selling elsewhere and avoiding fees, so I wrote to etsy help with this question.
The official answer is about the same, like you were told here.
1 - deactivate the item if it is possible to make a replica, you may have the same material available in the future. Then you can get back to it.
2- delete the item if it was one of a kind and you are not likely to have it again.
Good idea to save photos of sold items on your computer, so you may post them in blogs or any place on the net where you tell more about your works. People may view samples of what you had made and sold before. They may ask for custom orders of the items in similar style/ material/technique...
I deleted one of my necklaces just last night - it was sold here at the shop.
But I saved its photos - in case!
Good luck, Frey!
