This is a follow up post to my last about optimizing the Microsoft Virtual Server hard disks.
If you use dynamically expanding disks, don’t forget to once in a while compact them using the built-in tools or schedule a script that does it for you. Check out Microsoft TechNet Script Center and these scripts and the rest is up to you :-)
John Howard, program manager of Windows Virtualization, have a post on how to reduce the size of a VHD: VHD Size Reduction that is worth checking out.