I know Bettercreme is stable at room temp. If inst. pudding is mixed with it-made with water, is that safe at room temp vs. if it is made with milk??

yep, has to do with the ratio of fat to sugar!

Crusting is caused by evaporation (in the top most layer of an American buttercream) and can be adjusted by altering the fat to sugar ratio.
(More fat/less sugar = less crusting. Less fat/more sugar = more crusting.)

Sugar as a preservative, works because the sugar is hygroscopic (water absorbing) and controls the water activity in any liquid used in a buttercream recipe. (And this only works when the proportion of sugar is large and the amount of liquid is small.)

The science of adding liquid (anything) to Bettercreme is iffy to me because the Bettercreme is shelf stable (because of its formulation). When we start adding liquid, how do we know how much is "too much" and will tip the balance of the formulation out of sync so that it's no longer shelf stable.

Adding a tablespoon or so of liquid and a package of instant pudding would probably be safe. But you certainly can't make the pudding according to package directions and then add that to the Bettercreme without refrigerating the mixture. (Because the proportion of sugar in the pudding mix to the amount of liquid is definitely inadequate to control the water activity.)

HTH

Ok. I saw a recipe for the frozen bettercreme liquid-that was a box of pudding, 1/2C milk and a qt of the liq. bettercreme, mixed in during the whipping process. Would this be ok at room temp? Or would 1/2C water instead of milk be ok?? Or not at all, because the ratio is off?