I did not realize if you have more than about 400 SMS texts in one stack, the phone seems unable to delete. I have over 5000 SMS texts in one stack and I don't have the time or patience to delete them all individually.
Just throwing this out there. No idea if it will work, because I don't have any text threads with that many to test it on, but have you tried doing it in some other text message clients? Which one are you using now? Try it in the default text client, and then try downloading Handcent SMS or Chomp SMS and see if you can do it from there. Sometimes different apps will make it possible to do something that another app that's supposed to be able to accomplish, cannot.