"Save space by compressing files"

[Vamp]

Is this option recommended in my C: properties, or would it slow down my system?

[Vargas]

disk compression of already compressed files (such as mp3, divx, xvid, ect) might actually take up more space

[Chewie]

I wouldn't enable compression on a drive that holds an OS. It has led to instability in the past (Win9x line) and will certainly slow down the system.
Actually, I wouldn't enable drive compression at all.

[Virtualbody1234]

Same here. If you don't have enough room then burn some of your stuff to CD or DVD.

[Wolfmight]

leave the compressing to WinRAR.
Buy an extra Hardrive than have too little space. I got a 500GB one to do video editing on.