first thing to note: memory allocated with new and delete is completely global. things are not automatically deleted when pointers go out of scope or a function is exited. as long as you have a pointer to the allocation (such as the pointer being returned there) you can delete it when ever and where ever you want. the trick, is just makeing sure other stuff doesn't delete it with out you knowing.
that is a benefit with the sort of function structure the fstream read function has. it is fairly clear that all that function is going to do is read 'size' number of bytes into the buffer you provide, it doesn't matter whether that buffer has been allocated using new, whether its a static or global buffer, or even a local buffer, or even just a pointer to a local struct. and it is also fairly clear that the function is going to do nothing more with the buffer you pass it once it's read the data to it.
on the other hand, take the structure of your ReadBlock function; if you didn't have the code for that it would be tricky to figure out exactly what it was returning. is it returning a pointer to new'd memory? if so is it expecting you to delete it? will it delete it it's self? if so, when? is it even a new pointer? is it just returning an address to some shared static buffer? if so, when will the buffer become invalid (for example, overwritten by something else)
looking at the code to ReadBlock, it is clear that it is returning a pointer to new'd memory, and is expecting you to delete it when ever you are done with it. that buffer will never be overwritten or become invalid until you delete it.
speed wise, thats the other advantage to fsream.read's 'you sort out the buffer' approach: YOU get the choice on when memory is allocated. if you are going "read data, process, delete buffer, read data process delete buffer, ect.... " it is going to be alot more efficient to just allocate one buffer (to the maximum size you will need, this will be the size of your biggest single read) and just use that for everything, as suggested by Stephen.