<p>What is the best way to remove an entry from a hashtable that uses linear probing? One way to do this would be to use a flag to indicate deleted elements? Are there any ways better than this?</p>

The Python hash table implementation (arguable very fast) uses dummy elements to mark deletions.  As you grow or shrink or table (assuming you're not doing a fixed-size table), you can drop the dummies at the same time.
If you have access to a copy, have a look at the article in
Beautiful Code
about the implementation.