Kyotaka (sp?) wrote this in another bulletin, I think this will help
This is known as the 127GB barrier.
I'm guessing you installed windows with a CD that wasn't SP2 and just manually added the service pack.
You'll need to use Nlite to add sp2 onto your windows CD and then install it freshly.
nLite - Deployment Tool for the bootable Unattended Windows installation
there is a known work around by changing a registry setting then repartitioning, however you're better off doing a clean install.
EDIT:: It did not post the link with it, so here is the actual URL nLite - Deployment Tool for the bootable Unattended Windows installation