I may not be the best person in pc to answer it but I try :
Whats the healthy amount of space for a computer to use compaired to its allowed space?
You should be leavin about 5-10% of ur harddisk free. At least you should try to. Or, if you cannot do that, you should increase the amount of PC RAM. Or else your PC will really lag.
2 - Whatever you do, DO NOT touch the windows folder! It has things you shouldn't tamper with. All those files are essential for your PC to run. They control where you point your mouse, which program you open etc. Do not try to delete any of them unless you are 100000% sure of what you are doing. Especially the System32 folder for XP and System folder for 98. All of them are important.
3 - What do u mean? You mean cut down on space in the Windows Folder? Don't do it. You can try and uninstall other programs though, to cut down on space.
4 - This one, I am not very sure of the answer. But I think that is only in XP. When you click on the Properties, see the ? button in the top right. Click it and then click on the Size on Disk thing. It gives you the answer. I am not sure, but this is a better explanation of it : Though it takes only 7GB(or MB) space, it requires a lot more to store all that data. It requires extra cluster space to store it all. And this is probably, I repeat, PROBABLY, the reason why it is happening.