I am SOOOO glad a discussion on this topic has opened and that it's not just me. I have noticed the same thing.
As others have reported, this is definitely something that needs to be resolved ASAP as those of us who subscribe to multiple podcasts are unable to manage all of these superfluous entries.
The good news is I have found a workaround. The bad news is that this workaround will really only be convenient for people who don't subscribe to very many podcasts.
Here's what you can do. (And kevin10451 take note as it will allow you to accomplish what you're already doing without having to actually listen to all your old podcasts! 😉 )
Assuming you have few podcasts and/or few episodes and/or the time and the disk space to do so, you can do the following. If you subscribe to multiple podcasts I would recommend completing all of these steps for one podcast at a time before moving on to the next.
1) Download all episodes of the podcast by selecting the first download down arrow on the podcast title line. Allow all episodes to download.
2) Create a regular (not smart) playlist, and give it a name (I suggest, and will use in this example, "Deleter.")
3) When all episodes have finished downloading, highlight/select all of the downloaded episodes (do not select the title line for the podcast subscription). Click and drag these selected episodes to copy them into the "Deleter" playlist which you created in step 2 above. This will create copies, and the podcasts will still be listed in the podcast section.
3a) NOTE FOR STEP 3: If there are episodes which you have not yet heard and would like to keep to listen to, do not select those episodes in this step. Select and copy ONLY those episodes which you have already heard and/or otherwise have no interest in keeping or listening to.
4) From within the Deleter playlist, select/highlight ALL of the items within the deleter playlist. Right-click (or command-click) this selection.
5) A menu box will appear. Click on "Get Info." Another menu box will appear.
6) Click on the "Options" tab. Click on the drop-down menu next to "media kind" and change the media kind from "podcast" to "music." Click "OK" to make the change and then the menu box will go away.
7) Hold down the Option key on your keyboard while right-clicking your selection again. (You should still have all items in the Deleter playlist selected - but if they aren't, re-select them before doing this). Then select "Delete" from the menu that appears. In the dialog quesiton boxes that appear, select the options that you really want to delete the songs, and select the choice to remove them from your iTunes library and into the trash.
8) You will find that this removes the podcast episodes from your Deleter playlist as well as your Podcast list (actually they no longer appear in the pocast list the moment you change the media type from podcast to music, but don't just do that from within the podcast list because if you do the episodes will remain in your itunes library taking up space but you just will no longer be able to easily tell that they're there or find them).
While this does work, as I stated before, I would only recommend this for users with a small number of episodes/podcasts to delete. If you have gargantuan numbers of subscriptions or episodes, this will not be convenient and I would recommend waiting until a fix is made to iTunes. Personally I did it for a few podcasts but grew tired of the process and am waiting for a fix myself.
BONUS: For those who didn't grow tired of my lengthy post and are still reading, in case you aren't aware of it, there are some other things you may not know you can do. I actually REGULARLY put all of my podcast episodes into a music playlist as described above, even when I'm going to listen to them and not delete them. And once I put them in this playlist, I change the media type to music as described above. While I'm in that options box, I also do a few other things as well. I can set the equalizer and volume settings to my personal taste. Also - if I select the episodes on a one-by-one basis (the following option isn't available if you select more than one episodes at a time) there is a "start time" box which I can adjust. By default they start at 00:00:00 and end at whatever the length of the podcast is. But certain podcasts which notoriously start with a minute - or two - or three - of commercial - well you can fix that right now. All you have to do is change the start time to start at the one or two or one and a half or whatever minute mark the commercials are usually over by. You have SOOO much more control over podcasts if and when you change them to "music." 🙂