I wanted to do the same on the N800 and OS2008. I got exactly the same behaviour editing tasknavigator.conf: setting X-Load to false didn't help, neither did deleting the entry from the file. Similar results with the bookmarks menu. Reordering does work though.

There seemed to be something hard coded which would revert to a default configuration if it sees something it doesn't like.

After a lot of frustration a line in desktop.conf caught my eye:

I commented out that line (insert # at start) and rebooted. Now when I edit tasknavigator.conf it will allow the contacts and the bookmark menu to be deleted.

The task switcher however is no longer in the corner. Not worked out how to fix that.