<< Do a "grep <username> *" in the /etc directory and see where else it might be >>
Err...grep the username from the /etc directory? I'm not quite sure what you're after there but I don't see what that would accomplish. If you want to grep for something then grep <username> /etc/passwd, but not in the entire directory.
To remove the ex-users former /home directory it should be as simple as rm -rf /home/<username>.
Now, for GOD's be very careful, VERYcareful whenever issuing a rm -rf because it will wipe everything, recursive, without asking.
I'll never forget the day I witnessed a dumbass issue rm -rf /. I tried to stop it but the fsking command had already wiped the kill command, so there wasn't much I could do at that point.