Can't delete pictures?

Format the card again.

The memory card should be formatted each time you finish transferring your pictures to your computer, in order to avoid exactly this type of situation.

Internal memory means the memory of the camera. Deleting the pictures in memory card will not solve the problem.
In the menu you will find a menu item as storage (or somewhat similar). Set this to internal memory. Then delete the pictures (or better, move all the pictures to memory card).
The above steps will correct the problem.

First, it sounds like your mode dial is set to "clipboard". While it is, with no card in the camera, press the delete button to erase the clipboard memory. Then, set the mode dial to normal picture mode. Still, with no card in the camera, press the delete button again to erase anything from the internal memory of the camera. Then, insert the card and it should work properly.

I copied this from Kodak website Good Luck!
How do I transfer pictures from the internal memory of my KODAK Digital Camera to a memory card?
Follow these steps:

On the camera, press Review and then Menu.
Select Image Storage.
Change to Internal Memory.
In the menu listing, scroll down to Copy, and select OK.
Select a single picture, or select All.
When you have finished copying pictures, reset the Image Storage location to your original setting.
NOTE: You can also use a card reader to transfer picture files to a memory card. For more information on card readers and memory cards, go to KODAK Memory Cards

The problem may be simpler to solve. Perhaps you never normally change the setting from iA (intelligent auto), but the wheel with settings can get moved by accident. If it goes around one place counter-clockwise, it puts it onto the built-in memory, it seems. I had the same problem, and it frustrated me for months!

1. Turn camera on
2. Push the options/settings button (the button next to the view/playback button)
3. On the Capture Screen move over to "Setup"
4. Move down to "Image Storage" and make sure its set to "Auto" {if not select it and set it to Auto}
5. If already set to Auto, change to Internal Memory.
6. Power off and power back on then follow steps 1-4 to set back to Auto.

If this still doesn't work, backup pictures from internal memory to computer then delete all pictures on internal memery. Camera should automatically prompt you to change to memory card.

Try formating your memory card. Should be somewhere under your settings menu

it could be that it is still saved in the cam memory or memory card, erase both.

Try going to settings of your camera while memory card is in and instead of deleting try and look for the option to format your card. And that should be it.

It's quite possible that it's actually taking photos and storing them to the camera's onboard memory and not the memory card, explaining why it gets full so quickly with two pictures and why you can only delete two pictures. Look for a setting to change the storage to the memory card.