I have amost 400MB of files and folders in my C:\Documents and
Settings\username\Local Settings\Temp folder.
Do I need keep any of these files and folders?
No, they can, and should be, deleted periodically.
The temp folder provides workspace for programs. Programs can create
temporary files there for their own temporary use. Each program should
delete all its temporary files when it closes, but for various reasons
it doesn't always happen (for example, if the program crashes, it
never gets to do this). That's why it's a good idea to periodically
clean out anything left there.
Also note that there are some program installations which work in two
steps. The first step concludes by writing temporary files and
rebooting. The second step starts automatically after rebooting and
needs to find those files there (and then deletes them when it's
done).
Other than doing it automatically when rebooting (that would interfere
with installations like the kind I described), it's always safe to
delete the contents of the temp folder. Because it's safe to delete
any temp files that aren't open and in use by an application, and
since Windows won't let you delete open files, it's safe to (try to)
delete them at any time. If any fail to delete because they're open,
they'll either be deleted automatically when the app using them
closes, or you'll get them the next time you delete manually.
Some people may suggest that you reboot before deleting anything, but
that's not necessary, for the reason described above (on the other
hand, it doesn't hurt to do it).