Yes, a Story saved as a Highlight can be deleted. In order to delete the highlight, follow the below steps:
Step 1: Find the highlighted Story that you want to delete
Step 2: Tap it and hold it for a few seconds
Step 3: The Delete Highlight option will appear. Tap Delete
Step 4: Tap Delete again to confirm.
Even after a highlight is deleted, the Story will remain in the archive unless deleted from the archive.