clrmame uses the temp folder only when it needs to decompress data temporarily.
This is done when
a) an archive is in an archive
b) adding files to an archive to another where the archive types differ (e.g. 7z to zip, rar to 7z) or when copying data from 7z to 7z archives. A direct zip to zip operation does not require a decompress (unless you don't force it in rebuilder->recopress), so that's one of the main reasons why people should think about using zip...in 2025 multi terabyte hds are cheap, so getting some gb extra by using soldid 7z is -in my opinion- pretty obsolete. The wasted time is more expensive

By default the system's temporary folder is used (%TEMP%, which usually points to "C:\Users\your_user_name\AppData\Local\Temp").
To quote the readme file: "You can alter the temporary folder by modifying the "TempFolder" entry in settings.xml". So open the settings.xml file with an editor and look out for <TempFolder></TempFolder> and insert your prefered one.
....and all created temporary files will be removed on exit