Windows does not really do a great job of de-fragmenting a hard disk and this is especially true when you are trying to get a Virtual PC image smaller.

I did some searching on the web and found this: Free Disk Defragmenter which seems to do a really good job.

It looks like at a low level it copies all the files from the main used area in a temporary space on the disk and then copies then back to de-fragment them. Simple, quick(-ish) and it works like a charm.

Using this and the compacting the VPC image post describing the use of the built in compacter took a 2.5GB installation down to 1.5 GB. Can’t complain at that!