I use WMware Player v4.0.1 with Windows 7 Professional, 64-bit 6.1.7601, Service Pack 1, as the host OS. About 1 1/2 years ago I created a Windows XP Mode machine in MS Virtual PC which I then imported into VMWare Player. As far as I can see, XP Mode machines are generally created with a virtual 127 GB hard drive. In my particular case this is far more than enough as I use the virtual HD only for the OS itself as well as for a small number of application programs, so that the space actually used on the virtual HD is less than 10 GB.
Although I have not installed any additional programs since creating the XP Mode VM (I have only applied occasional patches of Windows components offered through Windows Update), the size of the Windows XP Mode.vmdk file has increased tremendously over time. It used to be less than 10 GB when I first imported the VM into VMware Player, but it is >74 GB now (although virtual HD use is still <10 GB).
What can I do to decrease the size of the vmdk file? In the Utilities menue of the Hardware tab of the Virtual Machine Settings I tried to use the Compact option, but I only received the error message "One of the parameters supplied is invalid".