Lots of different questions. Let me try to answer some of them ...
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My 130GB of space on my online Vista desktop has 8GB left and the C Drive status bar is in the red, which is fine.
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To start off, you're mixing memory, drive space, and online in the same post. These are all quite different. Your Vista desktop is nothing more than a folder on your hard drive with some links in it. It shares space with the rest of the drive. So, I'm guessing that you have a single partition with a capacity of 130GB.
If that's true, everything you have downloaded or installed is taking up part of that 130GB of space. This includes any and all Windows Updates you have ever done, any temporary internet files you haven't removed, any apps you installed or upgraded, and redundant copies of Vista components. Unlike XP, when Vista updates a component, it saves the old version so that it can be restored. Thus, updates, especially SP 3, take up more and more room over time.
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However, I have noticed up to a 2GB variation from day to daywithout me downloading or deleting anything from my computer.
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Apart from temporary internet files, don't know why this changes so much.
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Is it possible that my computer is "hosting" as storage and distribution hub for some hacker without my knowledge?
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Anything's possible. If you're hosting, there will be traffic going out. Third-party firewall products can detect and prevent that. Don't know if Norton can do that.
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Is the 2GBvariationa function of Vista's continuous defrag?
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Defrag will only affect the size of free space chunks, not the total amount of free space on the drive. Might vary by a few MB, but not by 2GB.
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Moreover, the "COMPAQ(C)" window which has the boot and user files, etc. I noticed or may have not noticed this before are now hidden.
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Vista default is to hide system files and folders. Unless you manually changed this, I would expect those folders and files to be hidden.
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SOME COMPAC (c) FOLDER CONTENTS
$Recycle.bin Boot Config.MSi MSOCache Hiberfil.sys IO.sys MsDoc.sys pagefile.sys sqmdata0o.sqm sqmnoopt00.sqm YServer.txt
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You can turn off hibernation and remove the hiberfile.sys file to recover some drive space.