When you run knife rackspace server delete --help, you get:
knife rackspace server delete SERVER (options)
There is no indication that the server id is required. Change this to be ID instead of SERVER
If you run knife rackspace server delete server-name you get an error stacktrace which includes:
/Library/Ruby/Gems/1.8/gems/chef-0.9.12/lib/chef/knife/rackspace_server_delete.rb:45:in `run': undefined method `name' for nil:NilClass (NoMethodError)
Change this to a nicer error indicating that no server with that ID could be found.