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Why can't ShadowProtect shrink the volume further?
ShadowProtect has the ability to shrink a backup volume so it can fit on a smaller disk than it was backed up from. (See article 152 for more information about how to shrink). There are limitations as to how far the backedup partition can be shrunk. There are some steps that can allow the image to be restored to a smaller disk but there have to be third party tools used in order to accomplish the task
The main reason is ShadowProtect cannot shrink the backedup partition past data written. To be able to see where the data is written on the disk there are free third party defragmentation tools available that will give a graphic representation of where the data is written on the disk for the partition. The below Image is a drive that was shrunk by ShadowProtect and can be seen that there is data at the end of the disk. So this is as far as ShadowProtect can shrink the backup alone even though there is a lot of free space available.
To be able to shrink past the last written data on the disk a third party partitioning tool would need to be used. Once the data has been rearanged so that it no longer at the end of the partition, then a backup can be taken of the drive and restored to the new smaller drive that is desired to be used.