Just thought I would put a note out here to say – beware! I know a number of people who have lost data after trying to compress VHDs with the “Compressed Folders” feature of Windows XP. Per KB301325:
When you create a compressed folder (ZIP file) that is larger than 4 gigabytes (GBs), the file may no longer be readable, and may become corrupted. You do not receive any error message when you create the file, but you cannot read the file after you create it.
Ouch! This is why I always use WinZip (support for larger than 4GB files was only added in WinZip 10.0 and later).