not so dumb - you just are stuck having to deal with Amazon's arcane attempts to keep you ignorant and forced to work within their system.
Kindle books are stored in the folder /sdcard/Android/data/com.amazon.kindle/files and below, depending on the content. The files are given coded alphanumeric file names and covers & other content is stripped out and stored in separate files.
To move an item to the archive, press and hold on the item listed to the right side and select the 'remove from device' choice from the popup list. This actually moves the item into your archive.
As far as I know, you can only move books to 'archived items' and I think the file remains in place and may not be actually removed from the N7 ever.
Since you can have thousands of books in storage on a typical N7, it's not to much a problem. Perhaps someone else knows how to actually delete files short of guessing and deleting with a file manager from the mentioned folder.
in general, you can open the book from any of the folders (add the "periodicals" folder category, too) ---whichever choice you select is displayed in the scrolling covers list to the right.