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: 
4GB XP? 16GB Win7? That seems an awful lot. My vanilla win7 install on VirtualBox was around 5GB, and you can certainly get XP down to 700MB or so.

Use a visualisation tool such as [WinDirStat](http://windirstat.info/) to find out what's taking up all that disc.

Stuff to target, if you don't need it and you really know what you're doing:

* unused Windows components (Control Panel -> Add/Remove -> Windows components, or in Vista+, All Control Panel -> Programs and Features -> Turn Windows features on or off)
* System Restore
* \Windows\System32\dllcache on XP
* \Windows\System32\DriverStore\FileRepository on Vista+, if you're sure you're not going to need any more drivers out of it
* \Windows\SoftwareDistribution\Download
* %TEMP%, the IE cache, the trash
* patch rollbacks (hidden $ folders in \Windows on XP)
* example shared media and \Windows\Web
* disable virtual memory to get rid of the pagefile (assuming you have enough memory to run swapless)
* disable hibernation to get read of hiberfil
* delete the large Chinese/Japanese/Korean fonts, if you don't use them
* all vendor crapware (if an OEM install) must be destroyed as a matter of course

For some of these on Win7 you have to take ownership of the files back from SYSTEM before you can delete them.
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