I am not entirely sure what this folder is for, but probably something to do with Start11 Search or the Start11 Control Panel shortcut.

I moved it to another drive on my PC and those shortcuts don't appear in PowerToys Run anymore.

Perhaps someone on the Stardock team could reply here to explain and possibly provide a workaround for this issue.

Unfortunately it seems the powertoys run tool searches the entire Windows search database and so finds matches.

Start11 creates shortcuts for the control panel in order for them to show in the search results in Start11 and this folder is set to be indexed by the Windows Indexing service.

Removing these files is strongly recommended against or Start11 will no longer be able to search for the newer control panel items.

In theory you could remove the folder from being indexed, but be aware that it may reduce Start11 performance especially using the Start10 search mode, but also for initial search startup.

The best solution here would be for powertoys to provide a filter option to ignore matches in certain locations as otherwise you may get results not just from those Start11 entries, but from pretty much anything in an indexed folder.

Due to how Start11 search works (vs Start10 search mode), it may well be these are removed in future versions as there is a non Windows search method we could use to handle those now which wasn't an option when Start10 was made, but for now they exist for a reason.

It would not be, no.  Note that enabling / disabling search does not delete or recreate it though.