How should I go about deleting this new Smart folder?
Give them a manage button that allows them to edit and save the smart folders? Or should I provide edit and hide folders on hover?
I'm trying to stay away from the pop up (are you sure you wanna delete this), tending towards the first one (Manage, Save) but that forces the user to do an extra step each time he wants to edit.
Note: There is no data whether users will create these smart folders or edit them or bother to delete them. But these interactions will occur multiple times in the application and I want to be consistent throughout.
You should go with the first option. It is what people would be expecting from an App environment, especially a web app.
So, why is what people are expecting important?
Because familiarity breeds expectation, and this usually leads to a better user experience because it matches what users are expecting. Here is some further reading to back this assertion up:
I would argue that you don't want to step away from a familiar approach unless you have something that is significantly better and therefore warrants the change. And using the 'hover' approach is a bad idea fullstop.
There does appear to be a movement away from using hover menus. How much of this is due to the growth of mobile devices is open to debate. Regardless, I have included some references for further reading on this topic if you're interested: