Hey man, welcome to the forums! First off, I'd suggest it might be System Restore hogging all your space. What you do is go to START, right click COMPUTER, go to PROPERTIES, then in the left corner, SYSTEM PROTECTION, click Local Disk C: System, then click CONFIGURE. It should look like the attachment. I'll use mine for example. When the system restore uses all its allocated space, it deletes most of it, for some reason to make room for more restore points. Then thats when your memory will be larger. Lemme know how it goes, and I'll see about the rest.
EDIT: Windows seven should use about 12GB btw, so thats where it goes, the more you update, the bigger that gets. Empty your recycle bin, too. Mine collects up to 30GB in a week.