After doing a limited amount of googling, I'm going to agree with LordoftheLeftHand in saying that they backup parts of your installation, so you don't have to use the windows CD.
It is possible that they also hold the driver files for windows-supported graphics cards/sound cards/network cards/hard drives/removable storage drives etc.
If that is the case, then removing the CAB files will not prevent your PC from running, but if you want to change the installation (e.g. by putting in a new network card), then you will have to put in the windows CD to find the files.
I could very easily be wrong though. It might be easier just to by a new HDD?
You should be able to get a 40GB drive for about £20 on eBay.