When you select this option, Newzie keeps pointer to that selected post in 'My Readings' box. Since posts kept inside this box are meant to be read later, they are all marked as unread and if selected post is marked as read showhow, it is automatically marked as unread.
Note that all posts inside 'My Readings' bin are actually pointers to real copies of those posts. Even though we call them pointers, they act and look like actual posts in any way. Hence, when you delete or mark a post as read listed in 'My Favorites' bin, its actual copy of that post receives that applied action.