If the space was truly freed up, the warning would go away
The system will report that D, most likely a recovery partiton, is low on space if you have scheduled backups in Windows Backup.
The problem is that Windows Backup does as it should by selecting a partition or drive other than C, but does not take into account that the only other partition or drive may be a recovery partition which has been sized large enough that Windows doesn't
think that it is over full, but small enough that it is not wasting space.
The above is the most common cause of the low disk space warning.
If you have upgraded an aging XP system, it could be your C drive which is squawking. Windows 7 takes up more space than XP. Yes, the advertizing tells you that it is not full of unnecessary stuff, but that is in relation to Vista, not XP.
Windows 7 plus whatever you install by way of applications and other stuff exists well on a partition size of 80gb or more. It needs to be this size to allow for the OS, whatrever you put on it, updates and patches that will be released, space for a decent
pagefile size PLUS free space such that the system has room to move, switch around, defrag etc.
For best disk performance, 25% free space is a very good thing, and is not a waste of drive space at all. The OS needs free space.
If your partition/drive is less than 80gb, consider increasing it if thehard drive will allow, or cloning it all onto a larger hard drive.
To see what is on your partitions/drives, use this utility