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How can I workaround the minimum disk space requirements?

Note: The following "workaround" was successful for me to install WSUS on a minimum-capacity server.

(1) To create 1GB of free space on a Windows Server 2003 SP1 system:
    (a) Temporarily move %windir%\%NTServicePackUninstall$ to a non-system drive.
    (b) Temporarily move %windir%\ServicePackFiles to a non-system drive.
            These two folders consume almost 1GB of space all by themselves.

    If you still need additional space on your system drive:
    (c) Move your paging file to a non-system drive, and disable or minimize paging on the system drive.

(2) To install the \WSUS folder tree with database and content store on a drive with less than whatever MS left in the install test...
    (a) Install the WSUS Server with the local store option disabled.
    (b) Reenable the local store option after installation using Options | Advanced from WSUSAdmin.
        This will install ~\WSUSContent to the \Program Files tree on your system drive.
    (c) Save Settings.
    (d) Create the \WSUS folder on your non-system drive.
    (e) Use wsusutil.exe movecontent D:\WSUS\WSUSContent <logfilename> to have WSUS 'move' the content store to your desired location.
    (f) Run initial synchronization.

The \Program Files\Update Services consumes 268MB after installation. I suspect the 1GB test is based on the "assumption" that the database will be installed on the C: drive. Practically speaking, I recommend that \Inetpub and \WSUS be installed on non-system drives, as well as the database. The installation will auto-unarchive to the drive with the most free space, so that should never be an issue on the system drive.

The $NTServicePackUninstall$ folder can be returned and compressed to 155MB. ServicePackFiles can be left on a non-system drive, but requires a registry change to modify the pointer to the folder.

I currently have Windows Server 2003 SP1 w/AD/DHCP/DNS, WSUS, and (as soon as I reinstall it) Symantec Client Security all running on a 3GB system partition with about 20% free space -- more than sufficient for a small office network. I promise to confess if that becomes an issue otherwise.

I'll save the gloating about it being a PentiumII/300 w/192MB RAM until much  later, but it's worth noting that the beta/RC install was on a PentiumII/400 w/128MB RAM. Short of some responsiveness with the database (and I intend to migrate the database to SQL Server 2000 later, anyway), I was quite happy with that configuration in my environment.