A fix for Windows Server 2003 VSS has the registry key to increase the 
workspace for VSS, which is the same in Windows Server 2008:
http://support.microsoft.com/kb/826936

>    1. Click Start, click Run, type regedit, and then click OK.
>    2. Locate and then click the following key in the registry:
>       HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\VolSnap
>    3. On the Edit menu, point to New, and then click DWORD value.
>    4. Type MinDiffAreaFileSize, and then press ENTER.
>    5. On the Edit menu, click Modify.
>    6. Type the size that you want for the shadow copy storage area, and then 
> click OK. 
> 
> The MinDiffAreaFileSize registry key specifies the minimum size of the shadow 
> copy storage area; the default setting is 300 MB, and the maximum setting is 
> 3 gigabytes (GB). For an accurate setting, specify a value that is a multiple 
> of 300 MB; otherwise, the next multiple of 300 MB will be chosen. A value of 
> 300 is equal to 300 MB, and a value of 3,000 is equal to 3 GB.


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