There IS a bug with DELETE and it is not an easy bug to fix. We will be looking at it in the next few days.
There is NO bug with the default batch size - the system is running slow for whatever reason processing a batch of a 1000 records on your machine. We need to find out why and we can't reproduce it on our systems. As you cannot send us your configuration and data we can only rely on your help here. One of our customers has been experiencing the similar problem - in his case it was memory. He had LogViewer open during a batch operation and LogViewer was taking more memory than was allocated to the Aware IM server in the startAwareIM.bat. As a result the operations took ages to complete and eventually ran out of memory. The problem was resolved when he turned off LogViewer and increased memory. I am not saying that this is what's happenning in your case, but you need to help us find the cause of the problem.
Please do the following:
1) Turn on maximum level of logging
2) Re-direct logging to a file and not anywhere else
3) Reproduce the problem
4) Send us the log file