msoucy, What the compress old files in disk cleanup does is to compress any files that haven't been used for a fairly long time. It does not delete any files but it compresses them to free up disk space. If your disk cleanup is freezing up during the compress old file segment go to the link below and scroll down to 48 and you'll see the "Disk Cleanup - Compress Old Files Freezes" Fix in the right column, download it and run it which should correct your problem.
"To use the Regedits: Save the REG File to your hard disk. Double click it and answer yes to the import prompt.
Just click on the words "Disk Cleanup-Compress Old Files Freezes" not the underscored word "Undo".
More info at the Microsoft link below.
Can someone please explain what the compress old files is under disk cleanup in Windows XP Home Edition? Can I safely delete these files and not loose any data? Why does Windows XP need to compress old files?