Once I subtract the size of my swapfile, I see that the amount of data on my C: partition is approximately 1 GB. That includes Windows XP Pro, and a few other small programs.
To clear some space, I recommend that you check the size of your "Temp" directory underneath \Documents and Settings\$USER\Local Settings\Temp, and also the size of your Temporary Internet Files directory. Certain pieces of software (such as Adobe Acrobat Reader) don't seem to properly delete their Temp files after installation, thereby wasting space. And IE 6.x seems to use an absurdly huge default cache size. Even though I usually use K-Meleon or Mozilla, I'd still run IE6 a few times -- enough for it to consume almost 80 MB of space for its cache folder.
After clearing Temp and reducing the size of Temporary Internet Files, I'm down to about 900 MB for the XP install.