Wow, reading this thread kinda feels like I stepped back in time. People scraping and pawing and running obscure tweaks to try to recover an extra gig or two.
These days, a base Win7 install is easily between 8-12 gigs. Over time and updates it can balloon up past 20 gigs depending on how much stuff you have installed.
By far the easiest solution is to simply buy more space. Grab a secondary drive for general file storage and non-critical apps, you can seriously get a TB for about $80. Or you can move to a bigger SSD if you need the performance.
Let's waste space just because we can?
I extensively use virtual machines--those things don't have a whole lot of storage, and I also like to limit each virtual HDD to 25GB (the size of a BD-R disc; it's convenient for backup). Also, my mother has a laptop with a 64GB SSD (a hand-me-down SSD that I had retired when I replaced it with something bigger; that SSD used to be in a desktop that had a large spinning drive to handle the bulk data). I was surprised how little space it had left the last time I checked in on that system. Yea, we could pop in a 120GB drive, but this is a casual-use web/mail/office system, so we don't like the idea of spending more money on it (and that would defeat the purpose of my recycling that 64GB drive

).
Alternatively you can move to Windows 8.1, the latest update had some massive optimizations made to reduce overall Windows storage needs in a push to make it viable for more devices.
That's not really true. 8.1U1 does not take any less space than 8.1. The space savings being alluded to are for
WIMBoot. Instead of installing Windows by decompressing the Windows system image into a bunch of loose files, WIMBoot installs Windows by keeping that compressed system image intact and booting directly from it. It saves several GB through the compression of the image, and some more by eliminating the need for a separate recovery image (since a perfect reset of the system can now be done by just clobbering everything but the original image, which remains read-only).
This obviously will incur a penalty (for run-time decompression) and has its limits (it won't fix the problem of "update cruft" accumulating over time since updates are not compressed back into the image and the original superseded files are never removed), and it's something that a system builder does at the factory (there is no pretty UI to do this: it requires a lot of command-line fun, in addition to, of course, reinstalling the OS).
It's aimed mostly at tablets, like my Dell Venue 8 Pro (with 32GB of storage, I really do feel the pain on that system), but as I said, merely upgrading to 8.1U1 won't confer me
any benefits on the space front. I'll need to nuke, repartition, and reinstall (and by "reinstall", I mean "reinstall manually from the command line using the ADK and WinPE, not with a friendly GUI") before I could reap any of the benefits of WIMBoot. (I will do it eventually, but after having read all the documentation to see what it all entails, I'm not exactly looking forward to it.)