Run the following command in Command Prompt:
vssadmin list shadowstorage
It will give you 3 numbers:
USED - that's of no interest
ALLOCATED - that is the space currently assigned
MAXIMUM - that is the maximum space system protection will eventually use
If you want to reduce the MAXIMUM, post back and we'll tell you how to do that. You can reduce it to a minimum of 300MBs. But that is only recommended if you do
Imaging instead.