Here is the pic I took.
The SETTINGS button is at the bottom.
It pops of the window in the middle of the screen where you can change how many podcasts to keep. You can decide to keep latest 5 unread, latest 3 new, all, etc.
There are similar settings under the podcast tab when the iPhone is connect.
I have noticed that if I click on the GET button to download a podcast it won't delete it automatically. I guess iTunes assumes that if I downloaded it, I must want to keep it forever.