They remove all excess drivers, fonts...and make it drive letter independant... Hey, you could also stick Portable Open Office (90 megabytes for full office suite) there and still have some space for stuff...
My personal favourite is to create custom XP installs for my computers/untech people, containing all the latest drivers, updates, security softs, patches, and pre-configured on top of that. 30 minutes of a normal XP installation, and you get a FULLY operational system, ready for productivity, needing nothing as soft reinstallations or the like. Thats some fast recovery if you ask me, with all office desktops periodically faiiling for humans reasons.
Those softs that allow that are nLite, and HFSLIP. Administrators' absolute best friends, on par with Knoppix.
http://www.nliteos.com/
http://hfslip.org/