I have convinced a customer to virtualize their out of warranty Windows 2003 physical servers onto a new piece of hardware (Yay! We will worry about 2003 EOL later this year, baby steps).
One of the 2003 servers has a 3.6 TB volume with only about 400 GB used, and a 1 TB volume with only about 10 GB used. When I've done this with 2008 R2, I was able to defrag the disk and shrink it before P2V. I'd rather not buy a bunch of storage just so we can P2V. Overall there is only about 1 TB of data, but about 5 TB total space between two servers. What's the best course of action on 2003?