Here's a great way to save some space on your hard drive with those big 'n nasty Virtual PC images:
Differencing disks.
The idea is simple: Start out with a hard drive image you're comfortable with, then create "differential" images based on that image, where the only space they take is the "difference" between the two. That ends up saving a lot of room.
So, for me this means I have a "base_XP" drive which I've created in the usual manner using VPC. I'll use this to create my own new "versions" of this drive where I install various builds of VS 2005 and so on.
The next step for me is to open the VPC console and click "file-Virtual Disk Wizard". In the wizard make sure you choose "differencing" disk when asked. You then have to point to the "base" drive (base_xp in my case) which you will be differencing upon. It's important that you make that base drive as good as you need because you don't want to touch it later when other drives are depending on it.
Now that you have finished making the drive, you just need to go to "file-new virtual machine wizard" and point to an existing virtual disk - your new differencing drive.
voila. You've just saved at least a couple of Gigs for each machine you're going to install off of that base disk.
have fun.