The newer updates have removed most of the limits but I still prefer to use the old ones.
I totally do this. Sure, I've got friends who max their machines out "because they can" but I don't go down that road. I put all the software and games I actually want to play (not every game known to mankind via WHDLoad) and I still have gobs of space left over. My current sweet spot for a HDD size is 512MB.
The other main benefit? My machines boot in mere seconds.
I don't think I've posted about this anywhere yet. I hope to go more in-depth about it later this year. But I've been slowly building a "monster" A3000 with a zz9000 graphics card that actually runs (gasp!) OS 3.1. It's my early 90s on steroids machine. This machine booted so fast originally (less than 7 seconds), it booted before
the zz9000 could even initialize, thus freezing the machine during startup! I had to go into the startup sequence and force it to wait 1 second just so the machine wouldn't hang on boot-up it was so fast.
Of course, if I had a gigantically obscene hard drive in the thing, maybe that wouldn't have been necessary. =)
An additional added benefit is very tidy, easy to make backups of the hard drive. I don't need to back up a system's drive with thousands of games and mod files - just my key setup I like from system to system. I do have too many systems, that much is true.