Is it safe to delete from C:\Windows\Installer?

No, it's not. Windows Installer uses that to cache installation files for anything installed on the machine using Windows Installer. At a minimum, you could lose the ability to add or remove programs, at the worst, you may lose the ability to run some programs.

Since Windows Update can also deploy Windows Installer patches, you could also prevent your machine from receiving Windows and Office updates.

You most likely need the content of the installer folder when you try to uninstall programs (e.g. microsoft office will complain some random named .msi/.mcp files when you try to remove it)

But if disk space is concern to you, compress the installer folder through NTFS! I do so in my ASUS Eeepc901 netbook, since it has a horrible 4G primary partition only.

Right click the folder "Installer"->properties->advanced->check "Compress contents to save disk space."->"OK"->"OK" again.

You'll be surprised by the space it saved.

As others have said, there are definite contraindications for removing files from that directory structure. I would also recommend against it.

However, if you are determined to proceed anyways, you can more properly do so using the Windows Installer CleanUp Utility. This will clean things up better than simply deleting files. This tool is, however, generally used for removing installation files that have become corrupt thus preventing you from uninstalling something the normal way.

The Windows Installer CleanUp Utility actually uses the MSIZAP.EXE command-line utility to perform the work.