I'd consider an alternative: Close and historically lock the proposal, and hide it from searches unless a checkbox "Show closed proposals" is selected. This ensures that they will not clutter up searches unless the user specifically requests them. This also allows users to look at failed proposals, which can help guide users towards making more successful proposals.
Perhaps more importantly, this allows users to keep the reputation they earned, rather than lose it (on the next rep recalc). We want to encourage "good tries", rather than cause users to lose the rep they earned for their efforts.
I acknowledge that the presence of a previous failed proposal may discourage future attempts to propose sites on the same or similar topics. However, if users are properly educated that a previously failed proposal does not mean that another attempt will automatically fail, this will not be a problem.
Having access to the original, closed, proposal would provide information that would help in starting a new one based on the failed proposal, without having to carry everything over to the new proposal.
Proposals that had very little or no activity at all should still be deleted as there would be no advantage to making them visible, even in a special search mode. I'd probably suggest setting the threshold somewhere around 3-5 questions; this will eliminate most unusable content. Otherwise, I stand by my original recommendation of historically locking and hiding failed proposals.