Within Jaikoz you can empty the current database using Advanced/Empty Cache this should clear it right down. If it doesn’t exit Jaikoz and delete jaikozdb folder and Jaikoz will create a new database on startup.
jaikozdb.old can be deleted permanently, I think that is a remnant of an earlier Jaikoz upgrade.
You are correct it is the incorrect place, for maximum flexibility I intend to add option for the location to be user configurable.
The Database stores a cache of files as they are loaded from your disk for quicker loading and a cache of every Muiscbrainz and Discogs release downloaded form the web for quicker access. None of this information is required but it makes things faster, as such its not temp data.
I guess it would make sense to allow a max database size to be specified, and clear out older records as required.