iTunes has this option of deleting podcasts you've listened to ("keep unplayed episodes") - this applies to both audio and video podcasts. However, a "played" podcast in iTunes terminology needs to be listened to the very end - basically played until the iPod itself stops playing it. Since most podcasts have credits (video) / music / clips / etc at the end, the entire episode gets fully played quite rarely. As a result, you have to delete things you've listened to by hand to free up room for upcoming episodes.

iTunes can automatically download podcasts you subscribe to, providing fresh content on a daily basis. That's all nice and cool, but it really wants to keep a copy for itself. Audio is one thing, but video podcasts, especially long ones, take up quite a bit of space. If you never watch them on iTunes, and just use it as a means of getting stuff onto your iPod, all that space is wasted.