I have a 2.0 GHz P4 with 512M RAM and a full hard disk (it does a Tivo thing) and this step can take 20 or more minutes to complete.
There is NO indication it is working except the HD light is blinking.
If you want, there is a registry key to turn off this step, but you can give it time.
Using Windows XP Home, the disk cleanup utility starts up at the "Scanning Compress old files", gets to about three bars and never gets any further. Any suggestions would be appreciated.