A compromise solution is to leave restore points turned on, but reduce the maximum amount of disk space they can occupy. Go to System > System Restore > Settings, and then adjust the slider. On this laptop setting it to 3% of disk space equates to 829 MB, which is typically enough to hold a week's worth of restore points.
Thanks for the tip. I think I'll reduce the paging file size to 192MB as well. I don't use more than 448MB of RAM on my laptop anyway.
Edit: By the way, as strange as this might sound, Windows is now reporting 1.45GB of space free. I haven't done much of anything since I last checked the drive's free space either.