No, nothing bad would happen. It’s safe to delete.
The only good thing it can do, that i can think of, is allow you to re-expand (install) system files with out a disc. Normally to do that you need to have the system disc in the drive, then use the expand command (i dont know it off the top of my head, but i recommended it to bmo once, if you really want to search for it) to safely install system files…i guess this directory could function instead of the disc.
Well, I deleted it several days ago and nothing bad happened, so.
These days, many of the OEMs (Dell, HP, Toshiba, Acer, etc) ship their laptops with OEM Windows XP discs that are universal, so long as you have an OEM Windows CD-Key. They don’t have any system specific information; those are usually on a seperate disc labelled “Application and Driver Recovery disc.”
Sony and Gateway do not offer standard OEM discs, they offer all-in-one DVDs that have the applications and drivers slipstreamed into Windows, so those discs won’t even work on other machines from the same manufacturer, due to driver conflict.