Via e-mail comes an excellent question from Mark Holmes:
Is there any reason to have to keep SP2 uninstall info on my C: drive? I’ve been using SP2 for over 6 mos. I could save about 302MB on my C: drive by deleting it. Just wondered if that would be ok to do.
It took me a few minutes to find the files that Mark was referring to. The first two computers I looked at were running Windows XP Media Center Edition 2005 and Windows XP Tablet PC Edition, both of which were released after SP2 with all SP2 fixes included in the initial setup. The third computer I looked at was more helpful, because I had set it up using the original release of Windows XP, with SP2 added on as a separate step.
On all three computers, opening the %SystemRoot% folder (typically C:\Windows) in Windows Explorer reveals the presence of a large number of hidden folders whose names begin and end with dollar signs. In the screen snippet below, I’ve configured Windows Explorer to show hidden and system files. I can also tell by the blue text in the folder listing that every one of these hidden folders is using NTFS compression.
The $NtServicePackUninstall$ folder contains files that are used if you decide to uninstall SP2, as documented in Knowledge Base article 875350: How to remove Windows XP Service Pack 2 from your computer. The folders whose names begin with $NtUninstall perform similar functions for individual hotfixes. If you allow Automatic Update to install SP2 or a hotfix, there’s no way to avoid creating this archive, nor is there any way to prevent similar (albeit smaller) archive folders being created when you download and install a hotfix via Windows Update or Microsoft Update. If you download the full installation package, you can use the /n switch as documented here to avoid saving uninstall files.
Each hidden compressed folder contains uninstall instructions and some backed-up files needed to roll back your system to its configuration before you installed that update.
If you want to remove any or all of these hidden folders, you can do so safely, as long as you’re certain you’ll never want to remove SP2. Just delete the folder from Windows Explorer. You could also do the same with the uninstall folders for hotfixes – but again, only if you’re certain you’ll never want to uninstall the associated hotfix. I don’t recommend doing this unless, like Mark, you’re extremely pressed for disk space and upgrading to a bigger hard disk isn’t an option.
Deleting these folders doesn’t affect the shortcuts in the Add Or Remove Programs dialog box. However, if you try to remove an update listed here after deleting its uninstall information, you’ll get an error message and an offer to remove the associated item from the list of installed updates.
Caution: If you go on a search-and-destroy mission for other Service Pack files to remove, you might stumble across %SystemRoot%\ServicePackFiles, which contains the actual downloaded files for SP2. Do not delete these files; they’re essential for Windows File Protection to automatically repair system files if they become corrupted or replaced by an incorrect version.
Ed Bott 
This is probably more of an issue of those users still using FAT32 on their drives, since those folders won’t be compressed and could therefore be taking up a lot of space. At least they are compressed on NTFS drives.
You can also back them up to a CD before deleting them; that way if you ever need to uninstall you can copy them back to the hard disk and uninstall.
Uninstalling hotfixes or service packs tends to be something you either discover you need to do shortly after install (hours or days) or you probably don’t need to uninstall them at all, so it is usually safe to delete (or back up and delete) if they are more than a few weeks old.
Ed,
Thanks so much for this little tip.
I have a Sony Vaio. In their infinite wisdom, Sony partioned the C drive to 16 gigs. I should have reformatted it from the get go but since I didn’t, I’ve been fighting space issues ever since.
Safely getting rid of some of this garbage was a huge help.
Thanks for the great tip. What about the folder $hf_mig$ Can this be deleted too ??
Do not delete the $hf_mig$ folder. Windows needs this to install the most current file, if you download a hotfix that contains an earlier version of the same file.