How can I delete pictures off Photo Stream to free up iCloud storage space?
"My Photo Stream" does not consume space in your iCloud account storage quota so deleting photos from Photo Stream will not free up iCloud storage space. 

If Photos.app has "My Photo Stream" turned on in the iCloud preferences, any photos that any device adds to "My Photo Stream" will get automatically imported into the Photos.app library on your Mac. They do not have to be manually imported. 

In recent (2017) versions of Photos.app, individual images can be selected and deleted from "My Photo Stream", but be careful when deleting things. Photos deleted from "My Photo Stream" MAY also be removed from the local library on the device (depending on exactly how they were deleted: delete key; menu items; contextual menu; etc.), but they will not be removed from any other devices that have imported the images into their local library (which happens automatically with Photos.app on the Mac). Photos that were removed from the local library can be recovered from the "Recently Deleted" folder on the device, and are not added back to "My Photo Stream". Note that the photos visible in "My Photo Stream" can differ between different devices, perhaps due to time lag between local caches and server updates.

To reclaim iCloud storage space, remove data from other services such as Documents and Data, Mail, and iCloud backup. In particular, iOS device backups can consume a lot of iCloud space - you might consider having iOS devices backup to your Mac through iTunes rather than backing up to iCloud. This change can be made using iTunes when the iOS device is attached via a USB cable.