Does the "purge" command damage any thing in my system? I am using OS X 10.5.8 and in spite of having 5GB of RAM memory, I face a lot of inactive RAM, and go to the terminal and purge it via the "purge" command (of course without quotes).

I do this almost every two days, some application(s) is(are) probably not freeing up memory.

I would like to know if this command is harmfull/if it can "damage" anything in the system/in open applications?
No harm will come to your system through using the purge command. The purge command clears out pages which have been written to memory which the system thinks it may need again. Usage of purge can cause some applications to temporarily run slowly if resources need to be reloaded.
From the purge man page for Xcode 3.2.5:

DESCRIPTION
Purge can be used to approximate initial boot conditions with a cold disk buffer cache for performance analysis. It does not affect anonymous memory that has been allocated through malloc, vm_allocate, etc.