Pre-order Refund

I have a pre-order where the child refused to have pictures taken on picture day. I assume I refund through my payment processor. do I put the original order in the trash and do I delete the customer's cart so that they can not come back and fill the order?

Also, it would be nice in future updates to have a refund status that will remove the order from the gallery purchases but allows us to keep the original order for record keeping in case we need the original records for later use.

You refund through your payment processor. 

Set the order to trash. You can still view that order unless you empty the trash. Orders in trash do not calculate in the sales totals. 

Delete their cart with their pre-order if they have one.