As noted by a post from Mike on 4/14/07 and answered by Victoria from
Microsoft, defrag in Vista increases used space on the drive. I just
discovered the same problem after running defrag c: -r, then defrag c: -w
from the command prompt. I lost 3.6GB the first defrag and then lost another
1.75GB the second defrag. After turning System Restore off and on, my free
space went from 16% to 41%. I would encourage Microsoft to see if there is a
fix for this lost space problem.

Regarding System Restore, when you turn it off and on again in Vista, it
does not automatically create an initial Restore Point as with XP. You must
create one manually. It should automatically create an initial Restore Point
as with XP. Windows 7 RC has the same issue - Microsoft, please fix.

HMT