Hmm. When I read your original post, I was going to agree with bsobel, the MFT was probably growing and eating up some of your free space, but now you mention you are running FAT32, which is probably more in my dept.
First, basic rundown - are you running any Norton/Symantec products on the system? Do you have "Norton Protected Recycle Bin" enabled? If you right-click on your recycle bin, you should see an additional entry for the Norton Protected Recycle Bin if you do have it installed. If that's true, then SHIFT+DEL will bypass the normal recycle bin, but not Norton's, and you will have to manually empty it.
If that's not the case, then time to look elsewhere. Do you have a Win98se DOS-mode boot-disk available? If you do, I suggest booting with it, and running a SCANDISK /ALL (skip the surface scan if you like, although take a quick peek at it, to see if any of the clusters on the graphical map are show as "B" - that would indicate that the FAT32 filesystem thinks that some of your disk has gone bad). The SCANDISK should, at the end, check the "free space count", and adjust it if necessary. Sometimes it doesn't get properly updated, especially if the system is not shut down properly (among other things). Hopefully, that should fix it.
If you did see any "B" clusters (another way is to do a "CHKDSK" within Windows, it will show the number of "bad clusters" in the summary as well - normally that number should be zero), then you need to: 1) backup your data/system, and 2) scan your HD using a boot disk from your HD mfg, such as WD's DataLifeguard, Maxtor's PowerMax, etc., and it will tell you if you have any bad sectors on the drive, and allow you to fix them (usually).
If none of this applies, then I think what you might be seeing, is differences in the sizes of files reported by the various means inside of Windows'. For example, in certain cases (depending on file names and attributes), right-clicking a directory in Explorer and selecting "Properties". and looking at the size totals, will return different numbers than if you open a Command Prompt window, and do a "DIR /A/S" command. Ordinarily, right-clicking on an entire drive in Explorer, will show a number for allocated space and total space; those should be accurate regardless, unless the FAT32 "free space count" is mistaken, but that should have been fixed by the prior step I mentioned.
Have you tried running the "Disk Cleanup" wizard? Perhaps there are some large temp files that were left around somewhere by the application that you were using? Consider emptying the IE cache too.
If that still doesn't help, then please post back, because I think that I've covered all of the common bases for that problem. (Don't forget that your hibernation and paging files take up space on the HD too.)