Deleting/Deactivating a user...what happens?

When a user is deactivated, an * is displayed next to their name, identifying them as an inactive user. This can be seen in the tasks assigned to the user, as well as in reports, when time assigned to that user is displayed.

When deleting a user, the person deleting them will become the owner of any tasks they created, assigned to any tasks assigned to them and Project Manager of any projects in which they were assigned as the Project Manager. This information will be displayed to the user performing the deletion and they will be asked to confirm the deletion.

This can be done but you would have to manually move over the tasks, projects, and milestones to yourself and then set the user to inactive. It might be very easy or a bit involved depending on how much data you have. Setting the user to inactive will make it so that they cannot login, but their time data will be preserved. For the tasks your best bet is to use the bulk update option where you can run a filter for all tasks assigned to the person and then bulk change the assignee. For milestone owners and project managers each milestone and project would need to be manually updated from its respective profile page.