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I can't reduce the size of my XP hard disk image in Parallels 3.0

I have a persistent problem with my Guest OS hanging because my Mac OS runs out of enough hard disk space. I have a 100GB macbook. The only thing I keep in Parallels are the actual Office apps, to manipulate documents and to use Outlook for Blackberry synching. All document files and email are stored on the Mac side.

The Parallels disk image is 47.5GB. I need to get some of that back for the Mac side. I tried to compact the disk and was told:

"The virtual hard disk /Users/christine/Documents/Parallels/Microsoft Windows XP/winxp.hdd cannot be compacted. To compact the disk make sure that the virtual machine has the Undo disks option disabled and the disk is not connected to a virtual machine with snapshots. Plain disks cannot be compacted."

Undo is unchecked. I have deleted all of my snapshots (which makes me uneasy, but I did it anyway.) Still can't get it to compact. HELP!!!! I am angry that my hard disk is being wasted and I can't get it back. What gives?
 
sad I’m very frustrated
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