You cannot shrink a virtual disk that easy. You'd have to use e.g. VMware Converter for this.
Regarding the snapshot location, you could specify the "workingDir" in the VM's settings to create the snasphots on another datastore (see http://kb.vmware.com/kb/1002929)
André
It makes no difference whether the virtual disks are provisioned thin or thick. What counts is the provisioned disk size, as this will be the maximum disk size (plus some overhaed) to which a snapshot could grow.
