I noticed this before too, I'm playing on Series X as well and you're not able to delete any text while playing with k&m. The only thing you can do is, whenever you make a mistake while typing in the crafting menu, writing on storage crates, etc is you have to click on the (x) with the little arrow icon to delete/clear all text and retype everything from scratch. Also, when you go to make custom markers on the map, you can't delete what you type either, you actually have to cancel out of everything and then create a new map marker if you mess up while typing since there's no (x) with the arrow icon to clear all text.
With that said, hopefully this can be fixed in a future update because, I much prefer to play with k&m than a controller. And speaking of controller, it would be nice if I could use my k&m while playing 7dtd without having to keep my controller powered on at all times as well. I currently don't have a USB-C cable atm because I use normal AA batteries that are rechargeable, so I have to keep turning on my Xbox controller every 10 minutes or so because it shuts off after awhile due to inactivity.
Anyway, regardless of the few little annoyances here and there, I'm absolutely loving the new 1.0 Console Edition as it's the only game I've been playing since it released in July lol. I'm also really excited to see what the future has in store for this game too because, I've been having a lot of fun playing it for the past few weeks.