There are many reasons for that increase, all due to software.
Do you use Firefox for you browser? It and all browsers store all kinds of things in their cache. Other programs create log files, like Windows. The list is endless.
Do you have Windows System Restore activated? If so, you probably have multiple restore points that take up space.
Have you ever done a Windows Disk Cleanup? Right click on your 320, and select Properties, or however it's done in XP. Look for Disk Cleanup and run it and check what it finds and have it remove all the temporary files and clear the caches at least.
Thank you for the suggestions.
I did a disk cleanup, moved my documents and settings, decreased the restore point space.
It seems that now the Windows folder is at 12GB and not increasing.
Hopefully it will stay like this.