Okay, you're just trying to gain space, it seems.
I would: a) run 'disk cleanup' - Start>My Computer>right-click on C:>Properties>General Tab>Disk Cleanup; b) run CCleaner as suggested by Carbon Dudeoxide - be sure to select 'Delete Index.dat Files,' if you use IE. This file can grow out of control over time - note that you must re-boot to allow CCleaner to delete index.dat; also, be sure to select: Temporary Files, Clipboard, Memory Dumps; c) look at My Documents and see if there are data files that you can move to an external drive or DVD or CD, e.g., music or pictures.
You are right to be concerned - with free space that small, you are bound to have your performance reduced. When you gain some free space, I would also suggest a defrag - wouldn't try it now because of the lack of free space.
Good luck.
EDIT: Go to 'Add/Remove Programs' and uninstall any programs that you no longer use.