Just move the games to "played" and minimize the category. Easy.
Except that Steam's user interface is utter garbage. You must painstakingly assign categories one game at a time, categories can become lost following failed synchronizations, etc. Valve's Steam division is HORRIBLE at each and every thing their business is centered around (customer service, billing, rich download/queuing options, game management, etc). That being able to delete a game from your library is newsworthy only illustrates how little we expect from Valve.
Here, buddy, have a thumbs up.
The truth hurts, and sometimes you gotta take it on the chin, steam fanboys.
Now if I delete a game does it also remove my logged hours and ownership of said game? I mean being able to do this will finally hide hours logged from playing on a free weekend.