To adjust the space allocated to the restore folder,
System | Performance | File System | Hard Disk and adjust the restore slider
to your preferred setting.  A  figure of 200MB is normally more than adequate
for day to day use allowing perhaps a week of checkpoints to be available
although increasing this to perhaps 400-500MB for a few days during periods of
large installs such Microsoft Office is advisable.

See also Win Me's Help & Support.

If however the folder is "growing and growing" you may well have a problem.
Post back with details if adjusting the space allocated to the folder doesn't
result in a reduction in size after a few hours.