I am not sure that I have fully understood your scenario. To cancel the delete functionality you can set the Cancel property from the event (DeletingItem) arguments to true. As you have already done that. Can you elaborate more on your scenario? What is not working?
I have created sample project based on the provided code snippets. When I press the delete button of the RadDataForm the IsActive property of the business item will be set to false but will not be deleted. I have found this property to the IsEnabled property of the GridViewRow using implicit style.
Give this project a try and let me know if this is similar to the behavior which you are trying to achieve.
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