I have a vectorised SVG with multiple paths. The problem I have is to remove background and change it to transparency. This is easy for the bounding rectangle, but within the image, there are letters like O, R and A that have empty spaces. Right now these "empty" spaces are represented by additional paths in the color of background that cover the base letter shape.

So I selected both O and its inner ellipse and tried to use Path / Difference on them. However, the result is not what I hoped for:
[*]The shape of both inner and outer ellipse is totally mangled. By experimenting I discovered that Path->Simplify is called on them (modifying simplify threshold in settings doesn't do anything for this)
[*]The resulting shape is transparent, but its color is black. While that's easy to fix, the tutorials specifically mention that the bottom shape will retain its attributes. That doesn't seem to be the case, therefore I seem to be doing something wrong. I did make sure the inner ellipse is on top though.

Any tips for a beginner?

Hi.

If it was a text, based on a font, you might better not trace it, but type it manually with the text tool.

If you really want to edit it by paths, then after the trace bitmap, ungroup the object (Ctrl+Shift+G).
Other than that, it should work.
The simplify is strange too. Boolean operations like difference may remove double nodes and merge crossing segments, but bitmap tracing hardly produce any of those.

If you subtract two paths touching each other by segments, there could be alot more new nodes than previously in them.
Maybe the problem is something similar.
Usually you don't need to make subtract paths to punc holes in the trace.

Can you share your svg/raster image?

Unfortunately this is a company logo and they are a 3rd party in my project, so I have had no communications with them. The vectorised logo I'm sweating on is just a placeholder, so not much effort was supposed to be spent on this question.

I was just trying to confirm if my issue is with usage or with data. After your explanation I'll go with data and just wait for my client to provide me with proper vector image. Thanks for explaining stuff for me.

At a guess you should not be using path / difference but path / combine.