Yes it is fine to delete the log.
There is a bug which allows for this growth. Shut down Microsoft
Antispyware in all active sessions via the notification area icon before
deleting the log.
I ran into this situation on a Windows 2000 server the other day, and had
some difficulty closing out the instances of Microsoft Antispyware. In the
end, I needed to restart the server, which was not good.
This situation may well return, so I would consider carefully whether the
benefits of the program are worth the risks.
So much for the growing log file.
Now--about the out of memory error on the scan. This may or may not be
related to the log file--retry and find out, I think. Some spyware changes
permissions on registry entries or files in such a way that the current
user, even if administrator, doesn't have access. This may be what you are
seeing on the scan. If that's the issue, cleaning with some other tool is
what will be needed.