Friend of mine has a 20 gig drive on her XP machine. The drive properties shows her using 17 of 19 gig. To clear out some space, I first had her check what files she could archive to CD and what needed to stay.
When she adds up the 15 or so top-level folders in her drive, it totals around 9 gig. This didn't make sense, since everything should be accounted for in those folders plus the additional files in the drive. So I had her download Disk Recon, which is a glorified search tool that also lists size and number of files for folders. The program showed 9 gig used. I ran the same search on my PC (Win2k), and it had the same utilization on both the C drive properties and Disk Recon.
Hidden files were accounted for. The only difference between hers and mine that might make the difference is the system restore. I don't know what it's called, and if it would be 7 gig worth of files. Doesn't make any sense to me.
Without knowing what brand of drive it is, I can only guess. If it is an older drive, you may be able to obtain a patch from the manufacturer to fix it. At one time, there were barriers that could not be exceeded. Is this a new problem, and has the hard drive on the machine in question been replaced? You may need a BIOS update.