it's not the simple. The Admin account is a built in part of the OS. The SAM file contains the password information for the account. The Design of XP provides an ACL for the Admin account, so if the account becomes corrupt, you can delete it and then let it create a new one based on the informaiton housed in the Default user config and the SAM and the ACL for the account type.
does that make sense. Yes, anyone that has the rights to delete the admin folder can, but that doesn't really mean anything. you have to have the rights, and the access to the machine. NOt a security flaw, just a good way to allow for recovery. Now, you will loose all the data and files that this account had. You can also just rename the folder and that will do the same thing.
Not NEW admin, Same admin.
Trust me on this. I do this all the time at work. I'm very proficient with profile issues in XP, 2k and NT. It's something I have to do all the time in our environment.