Need help resizing VM to recover Mac disc space

I'm stuck in a dilemna at the moment and I don't have the tech know how to even know if I'm asking the right questions.

I was guided in 2006 when I set up Parallels by their tech staff at the time, and ended up with one VM with 8,000 HD and a second one of 20,000 HD (thinking I was adjusting the size per their recommendation, not creating a second VM). On the Mac desktop, I created a shared folder of .exe programs I'd need... and then never used Parallels for 18 months. I've upgraded to Leopard, and upgraded to Parallels Desktop.

So today I'm faced with somehow missing 45gig that I think has been the partition for Parallels, etc. and I am out of memory on the Mac side and it's now operating like a slug.

I need to 'repartition' and get 20 gig back for the Mac side.

I'm not clear..
1 - should I just delete the 20,000 HD altogether? Will that give me back my 20 gig on the Mac side?
2 - should I be 'compressing' something instead, and if so, how, where, in what window?
3 - should I then just always work with the files in the 'shared folder' and will this stop Parallels from expanding its size?
4 - I saw an earlier thread where someone said they keep all their files on a USB drive - Will this prevent parallels from expanding?

I've been going in circles for days and need to get this done.

I profoundly appreciate any guidance you can give me on this!

 

Did you create snapshots? Snapshots use up a lot of disk space. You can merge snapshots with the Parallels Image Tool to reduce the size of HDD.