Question: My Windows 7 setup uses around 16GB while Windows XP only needs around 4GB hard disk space. Seems weird. I use Windows only for gaming so I don't need a lot of stuff they have to offer.

What is the best way to reduce the size of Windows 7? What can I delete / uninstall and how? 

I'd also like to reduce the CPU and memory usage as much as possible (as long as it doesnt hurt game performance) - turning off all that fancy stuff and so on. What can I turn off and how?

Answer: 
Windows Vista/7 doesn't provide explicit way to disable hibernation. (I don't know why)
You can make this with following steps :

* Open command prompt with administrator privilege.
* Type this : powercfg -h off

If c:\hiberfil.sys file disappear, it has worked.
One idea would be to create a slipstream install cd for windows 7. This involves removing all the stuff you dont want installed and adding additional files (like drivers)

Simply google slipstream windows 7 installation and there are so many sites who can help you with this