I've been stuck a few times over the last few years when using a VPC and running out of HD space.  The solution at the time was always create a new HD and start filling that up.  This tool solves this problem.  Check it out here.

Also check out these article for organizing and optimizing your VPCs.

 

HOWTO: Use Virtual PC's Differencing Disks to your Advantage

How to use virtual PC and still save lots of room: differencing disks