A new laptop with a 120GB drive cannot be close to full.. XP only takes up around 40GB MAX... programs such as photoshop take up about 1GB... you should have tons of room left.
I would suggest you download Treesize from here:
http://www.jam-software.com/freeware/index.shtml it is a free version of their larger program which is fantastic. It will show you every folder on your computer (across multiple drives) and tell you how much space each is taking up.
Run it and then let me know which folders are what size... you can attach a screenshot which would be helpful too. Once you find the largest folder... expand that so I can see the offending subfolders/files.
It could be your pagefile is setup to be huge or something... Thx!