Coding Horror has posted a howto on reducing the size of Windows XP virtual machines.
Now that Virtual PC is finally free, I’ve become obsessed with producing the smallest possible Windows XP Virtual PC image. It’s quite a challenge, because a default XP install can eat up well over a gigabyte. Once you factor in the swapfile and other overhead, you’re generally talking about around 2-4 gigabytes for relatively simple configurations.
My best result so far, however, is a 758 megabyte virtual machine image of a clean, fully patched Windows XP install. Not bad. And here’s how I did it.
It isn’t mentioned in the article, but it may also be worth looking into nLite to create a stripped down Windows XP installation disc before you install it into the virtual machine to reduce the initial size.