I had the same issue regarding vpc image size. The vpc image does not decrease in size even after you delete files or uninstall programs. The vpc image only grows in size it does not dynamically get smaller.
You will need to manually reduce the size of the vpc image with this procedure:
This procedure is for Windows 95, 98, NT 4, and 2000 guest operating systems.
Be sure to backup any important data before beginning procedure, as this directly changes the guest image contents.
1. Defragment the guest OS hard drive.
2. Backup any critical data in the guest OS.
3. Download Eraser, (
http://www.tolvanen.com/eraser/) and install it in the guest OS.
4. Run Eraser in the guest OS.
5. Select Edit->Preferences->Erasing
6. Select "Unused Disk Space"
7. Select "New"
8. Enter the description "Blank"
9. Select Add
10. Create a 3-byte pattern of zeros. On the "Custom Method Editor" window, near the bottom you'll see "Pattern" and underneath that, will be "Byte 1" (with 8 zeros), then "Byte 2" with a checkbox by it, and a greyed out "Byte 3". When you check the "Byte 2" box, the "Byte 3" will no longer be greyed out and you can then check it, thus creating a 3 byte pattern of zeros.
11. Hit Save
12. Select "Blank" under "Unused disk space"
13. Hit Ok
14. Select File->New Task
15. Select "Unused space on drive"
16. Select Local Hard Drives
17. Hit OK
18. Select Task->run on the previously created task
19. When finished, close the report
20. Exit Eraser and shutdown the guest PC. Make sure the guest is not in a saved state.
21. Use Virtual Disk Assistant on the Mac to reclaim lost space. Pressing "command+d" will start Virtual Disk Assistant.
22. Select Examine or modify existing disk image, and click the right arrow to continue.
23. Click Select Disk and browse to the location of the disk image to compact. Generally, this will be the Virtual PC 4 folder.
24. Double-click the disk image and click the right arrow to continue.
25. Select Reclaim zeroed drive space and click the right arrow to continue.
26. Click Reclaim Space.
Hope this helps.