Windows XP had an option to manually choose the amount of space System Restore uses. This thing can use upto 10% of your hard drive space. It turns out to be a great amount. In Windows Vista, you can use the command line, with a very simple command to limit the space used.
First, type 'cmd' in the Start Menu search box. Right-click CMD and choose 'Run as administrator'. Click continue in the prompt that comes up. Then, type in the command:
vssadmin list shadowstorage
You will now see the amount of space it already uses. Now type in:
vssadmin Resize ShadowStorage /For=x: /On=x: /Maxsize=yGBHere, 'x' stands for the drive Windows is installed on. And 'y' stands for the amount of space (maximum) in GB. 3GB is a pretty good amount. The minumum is 500 MB. But I strongly recommend 3-4 gigs.
Good luck. Enjoy the extra space that you suddenly got. The first time I did it, I got an extra 10GB.