What happens to the recurring invoice setting once a customer has been deactivated?
Nothing. Recurring invoices will still be flagged for creation. So, if you inactivate a customer you should check that no recurring invoices are set up.
It does seem like when any supplier, customer, or employee is deactivated, associated recurring invoices or payslips should be deleted. I will put this into the ideas category and change the title to include other types of transactions.