Use the remove
method of an xmlElement :
tree=et.fromstring(xml)
for bad in tree.xpath("//fruit[@state=\'rotten\']"):
bad.getparent().remove(bad) # here I grab the parent of the element to call the remove directly on it
print et.tostring(tree, pretty_print=True, xml_declaration=True)
If I had to compare with the @Acorn version, mine will work even if the elements to remove are not directly under the root node of your xml.