Step A - try to delete a list
$w
.Lists.Delete([System.Guid]
$w
.Lists[
"My List Name"
].ID)
Step B - toggle list cannot be deleted error
$list =
$w.Lists["My List Name"]
$list.AllowDeletion = $True
$list.Update()
The delete command will now be visible on your list settings again and you'll run the line below:
$list.Delete()
Blog Ref:
http://jessepatricio.blogspot.com/2011/12/could-not-save-list-changes-to-server.html