It DOES delete the theme folders. I was in the directory via ftp, hit the update, refreshed ftp, and they were gone. This happened on 3 sites. I could not access the front end of my sites, as there was now no theme associated with it.
Run your site through cloudflare, I just set my sites up through it, takes 5 minutes, and makes a world of difference. http://www.cloudflare.com
I did a speed test of your site at http://gtmetrix.com, they give it 94% speed grade, but your yslow numbers could come up. Maybe you have a crappy hosting provider, I don’t see anything out of the norm.