Hey Varun,
Yes, this is working as designed, and exactly as we described above. The library\activate folder is a temporary area that is associated with the active jobs. Once there are no more active jobs pointing at a particular software package, it's folder is removed from activate.
So if you deploy a software package to 25 agents registered to the same scalability server, the package will be available in the library\activate folder until all 25 have executed the job, or until the job container is completed/terminated at the Domain Manager-- whichever comes first.
Starting from the beginning, when you deploy a software package from the domain manager, to a list of target agents, software delivery queries the database to generate a list of scalability servers that will be involved in the job.
Once it has the list of scalability servers, it queries the database records to find out if the package is already staged at each SS or not. For those that do not have the package already staged, it initiates a DTS job, to temporarily store the package on the SS. This is what creates the activate folder, and populates it with files.
For the scalability servers that already have the package stored in the staging library, the activate folder is still created, and it's populated with an NTFS junction (think of it as a shortcut), to the arc folder in the library that contains the package.
It's important to note that an NTFS junction is much more serious than a simple shortcut. Deleting a "shortcut" will not delete the referenced file/folder on the other end. However, deleting an NTFS junction (which Windows Explorer uses the same short icon for), will result in the file/folder referenced to be deleted on the other end. This is why you never want to manually cleanup the activate folder. It will actually erase software packages stored in the staging library!
Thus, whether the package is staged already in the SS library or not, a folder within activate is generated, and the source file for the package are either copied/extracted by software delivery, or an NTFS junction is created to reference the source files in the staging library.
Once the scalability server realizes that there are no more jobs (as their may be multiple referencing the same package), it will delete the subfolder in activate, as it's no longer needed.
I hope that clarifies further, but real understanding will come by observing the activate folder, and sending a test software package to agent(s) registered with that scalability server.
I still don't understand exactly what you're doing by having scalability servers without a staging library, and serving agents that will never receive a software job. It sounds to me like your using the SS for some other purpose, outside of ITCM, maybe in conjunction with another tool. But by the same token, if activate is getting populated with packages, you must be running some software jobs, to some ITCM agents that register with that SS.
Regards,
Brian