I've just come across this file on my Son's laptop, its taking up over 800MB of space - marked as unmovable by MyDefrag.
The only thing which I have come across which mentions anything about shrinking this is chkdsk /f on windows Server 2003, I tried to get the hotfix, but it doesn't install on XP. Have thought about installing on 2003 and copying the chkdsk.exe to my xp machine....
See this article http://support.microsoft.com/kb/919241/en-gb
Do you see any way to get this to work on Windows XP?