I have not yet deleted the content on the System Drive but it appears safe to do so. You can verify where S1 found the data by right clicking some audio clip in the browser and selecting the 'Show In Explorer' option.
In other words all of the content that I am expecting to see shows up in the S1 Song page Browser and there are no authorization issues.
Just in case it might help someone else with this issue, Thru experimentation I have found that copying all of the sound sets to a folder on the new drive (e:\Studio One\Sound Sets\), and adding this new location to the Studio One Preferences Location page as well as deleting the reference to the previous location which was on the system drive (c:\Users\My Documents\Studio One\Sound Sets) seems to be working.