No. You can't increase HDD space with software. You need to either add a hard drive, upgrade your current hard drive, or buy a USB Portable hard drive. I recommend the latter..
You can buy an external hard drive from any good PC retail outlet. Here's a link to the kind of thing you should be looking towards.. http://www.amazon.co.uk/exec/obidos...electronics-uk_12631352_1/202-0874101-7071835
Running 'Defragment' may clear up some hardrive space, but nothing significant. It takes a while to run so I'd suggest doing it over night. But if you need some additional room an external hardrive is a good investment. The best part is it is easily usable on other computers, and newer ones. So if your computer dies you didn't really lose an investment, you'll always need memory.
Not only that, but it's a lot easier having an organized backup in an external HDD rather than using DVD's