Peter thanks that worked great.

Maybe I don't understand what you are asking but if it is what I think you are asking here a suggestion.

DBCC Shrinkfile

I've noticed that I had a log file that...

You won't be able to restore the master, model, or msdb but any other database you shouldn't have any problems.  You may have to use a script with the MOVE...

I had no idea you could shutdown SQL Server from Management Studio or EM. 

Since you're migrating, you should use a script.

ex.

RESTORE DATABASE "ITIS"

FROM DISK = 'd:\backups\full\bu_ITIS.bak'

WITH MOVE 'ITIS_Data' TO 'D:\SQL Server 2005\MSSQL.1\MSSQL\DATA\ITIS.MDF',

  MOVE 'ITIS_Log' TO 'E:\SQL Server 2005\MSSQL.1\MSSQL\LOG\ITIS_Log.MDF'

GO

Just write a  script to do the restore and you won't have to create a db name on the server before hand.  It will also restore all objects.

I've been able to do a fresh install of SQL 2005 in about 45 mins on my test server.  Then I was able to restore from backups, except master, msdb,...