Don't delete that folder
It can come in handy. In fact under start/programs you can access a little exe app that shows all the software/drivers installed and by checking/unchecking you can reinstall.
Think of it as a backup-the restore disks, except on your HD instead of in some drawer somewhere where they get lost.
The HP apps/drivers come as softpaqs and the first thing they do is decompress in that swsetup folder and add info to the .ini file for the little exe app that keeps it all organized.
Yes it is big, mine was 2 GB. If you want to remove any remove the one for drivers to all HP printers (but only HP printers-and with the full feature driver with GUI console etc.) which on my notebook was like 800MB decompressed. Just that one frees up like 1/3 the space the folder uses. Shoot you can even burn to disk before deleting that one.
If your HD space is such that you have more than 30% free then leave that folder for future convinience. As I said that little exe app that organizes everything is handy for reinsalling your drivers without the restore disks-and it even updates itself for new driveres you download from HP, and once you screw up the folder, the structure, etc then you will never be able to use that little exe app again as it just closes if you monkey around by deleting or adding to the folder and the ini file does not match.
Only if HD space is less than 30% free should you consider deleting, Even then I would burn it to a disk and save the structure to reintall later if you want to at a later date.
YES YOU CAN DELETE, NO YOU SHOULD NOT UNLESS DISK SPACE IS AT A PREMIUM AS IT CAN BE VERY USEFUL.