I then browsed and found out that it could also be a result of the hibernation file. The default settings are that it would hibernate when left alone as part of the system power/performance settings. I went and disabled it by turning it off via the command line and wala...My hard drive jumped for 80GB to 150GB. It is good if you are a space junkie and don't worry about anything else.
Switching off the hiberfil.sys via the command line brings along a headache along with it. It disables the system restore and then you won't be able to restart it without having to reiinstall xp.
1) How can I manually delete these restore files and where are they in the system. I couldn't find it inside c:\windows\system32\
2) Is it possible to set the restore point overwrite system. What I mean by this is to ask the system to keep a set number of restore point file and to recycle it once it reaches the last file. I assume the default is like 10 restore files. Once the 10th file is reached, it goes back to 1 and overwrites that file with new data and the old one is history unless you copy it and rename it with a diffferent filename.
I look forward to getting some geeky feedbacks and looking forward to put them to the test. If your solution works then I will reveal it so.