Most Sharepoint developers use Virtual PC for their development tasks. The VPC images has a tendency to grow very large, and the size of the VHD file is not reduced when you delete files.
Here are a few tips on how to reduce the image size by compacting the VHD file. To save space and reduce the size of a VPC image (several gigs depending on the setup) you can perform the following tasks:
Note! If you do this you might not be able to install additional services for windows that require the service pack files. Also, you will not be able to uninstall service packs and patches that have been installed.