You may try the following:

  • Shrink SQL transaction log files using DBCC SHRINKFILE (see this KB)
  • Shrink SQL data files using DBCC SHRINKFILE or DBCC SHRINKDATABASE
  • Destroy unneeded files (specify the /startcleanup flag)

If you decide that you will need new hardware, you can use the TFS to TFS migration tool to migrate to new server.