I just tested the ‘Show SIM contacts’ setting, and it is functioning as expected.
SIM contacts vanish if it is turned off.
But indeed, if they are/were imported using the corresponding function, they can not be deleted using the context menu on long press.
Not sure whether that is a regression or has always been this way.
Workaround: in People, use the Pulley menu to ‘Select Contacts’, tap those you want to delete, and hit the trashcan button.