Smallest Windows version for Mountain Lion-MacBookAir mid 2011

I have a MBA mid 2011 with a 128 gb hard drive. I run parallels for just a couple of pc based programs.

My Windows XP Pro 32 bit stopped worked and subsequently deleted it and found that I had been using 81gb of memory from my mac.
I purchased a Windows 7 home premiums, despite deleting as many files as possible, it doesn't have enough room to complete all of the uploads.

What is the smallest version of windows that I can use and attempt to onlyl use about 20gb if memory, windows xp pro sp3, windows xp 64 bit, windows xp sp3 home, or any other suggestions?

Should using xp save a lot of memory compared to windows 7?

What is the difference between using a 64 bit versus a 32 bit windows program?

Thankss