Installed MSE.
Is it running the highest protection by default?
Yes, it is, and it will keep itself updated, too.
WOW... Firefox takes like 72MB along with Skype which takes 52.
Windows Explorer takes 26,000K.
Everything else takes little space
Is there any way to optimize Firefox so it wont take so much space?
That's one of the reasons why I stopped using Firefox, among many others. I got tired of memory leaks. For me, I am fine with IE. It is already there, works fine, and does the job. However, why are you worried about using 72 MB of memory for your web browser when you have 4 GB?
People need to break their old line of thinking that memory usage is bad. Would you by a 400 HP BMW and then only drive 20 mph so you use as little of the power as possible? It's been very VERY well documents that Windows 7 uses your memory efficiently, to optimize speed and performance. That's a good thing. You paid for 4 GB...let the system use it.
I use Windows Classic as my current theme.
That means my performance is better then it would be with the regular default Windows Aero?
No, just the opposite. You skipped what I said before. Aero lets the video card handle a lot of the display work, instead of the processor. If you want performance, and have a video card that is Aero capable (you do), then leave Aero enabled.
As a general suggestion, you are making assumptions based on how Windows XP ran. Forget all of that. Windows 7 is not XP, and shouldn't be treated as XP. Old ways of thinking can actually be counter productive to Windows 7 usage.