I use ghost to backup my windows partition. To make the backup smaller you can remove the hiberfil.sys (for hibernating) and pagefile.sys (extra ram) from your partition before you make the ghost.
The hiberfil is the same size as the amount of RAM you have, and the pagefile is mostly about 400Mb.
Boot in DOS (the old operating system), herefore you'll need an old WINDOWS98 bootdisk with attrib on it. Run the following commands:
attrib -s -h hiberfil.sys
attrib -s -h pagefile.sys
This will make a huge difference.