Can I control the amount of disk space system restore uses?

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 Yes, you control how much disk space to allocate to Vista for the restore points. Here's how:
 Go to Start
 In the search field, type: cmd
 Right click the "cmd" item and select "Run as administrator" Click OK for any User Account Control prompts.
 At the command prompt, type the following (copy & paste for accuracy):
 
 vssadmin list shadowstorage
 
 Press Enter
 The above command will list the current amount of Used, Allocated and Maximum allowed storage size for the Volume Shadow Storage on your computer.
 
 To resize the amount of disk space that Vista allocates to shadow storage, type the following exactly as shown, press enter when done:
 
 vssadmin Resize ShadowStorage /For=C: /On=C: /MaxSize=2GB
 
 Note: The above example assumes that the root drive for your system is C:
 
 You should receive a message that informs you that the command was successful.
 To change the maximum allocation, replace 2GB with your preferred amount (eg: 600MB or 5GB).