it really decreasing or just that the os reporting less space?
for ur info

in computer world

1,000 ~ 1,024 B
1MB = 1,000,000 B ~ 1,048,576 B
1GB = 1,000,000,000 ~ 1,073,741,824 B

160GB = 160,000,000,000/1,073,741,824 = 149.0116119384766

that's why we see only ~149GB after format the hdd etc..

You can also check the capacity of the hard disk to make sure it's really 160GB in place, such as no reporting smaller space than 160GB (160,xxx,xxx,xxx bytes)
You can also do Clean disk to clear up temporary files that might accumulating the hard disk, if you're using system restore for all your hard disk partition you might notice hard disk space is decrease at some margin due to schedule system restore point (so you can restore to the previously good one when you having system error, etc.) If you're using Windows XP, every single drive that formatted as NTFS will automatically monitored by system restore point so you might want to disable other drive except for your system drive (i.e. C drive, your drive that you install "Windows")
CCleaner, it might be useful to detect what temporary files actually accumulating your precious hard disk space as well.
If defragmenting can recover those lost space, you can download defraggler, and schedule it to defrag when you sleep, idle, etc. (Manual also can actually) so you don't have to be afraid of losing precious space again.

Hope this helps.

1. Right click the drive and properties.
3. Does your Defraggler itself will actually do some Recycle Bin emptying as well?

If the space is decreasing for unknown reason, you might need something to monitor the space much frequent than each week or daily, perhaps some monitoring tool that allow you to watch the space real-time even you're doing some browsing, etc. that should help you identify what program actually create or dumping so much temporary or unnecessary files.

http://www.cnet.com/topic-software/hard-drive/monitor.html

Tried Si Meter, HDD Led, both provide real-time HDD activity monitoring, but not so detail about the space usage.
There's plenty of others if you have the time to try them all.
Most of them are free