As I said, no, do not delete it from your iCloud listed devices. As long as it is there, activation lock remains in effect. There is no risk to you by leaving it associated with your iCloud/AppleID profile.
If you remove it then anyone can use it as their own. As long as it’s tied to your iCloud and AppleID then nobody can complete setup and activation and actually use it for anything.
If it has been erased in itunes (anyone can do that) it won’t show a location or any info in the find my iPhone app as the remote tracking link is broken with the erasure. But activation lock is independent of that and remains in effect as long as that device is listed as tied to your iCloud/AppleID. When the person who erased it tries to complete setup and activation, then cannot do so since they don’t know your AppleID password, making the device useless to them.
You should also report it to your carrier as they may blacklist it on the network as well. In the USA all carriers participate in a universal device blacklist, which is also honored by most or all Canadian and Mexican carriers as well.
