Excelsior JET 4.8, an implementation of Java SE 5.0 that creates a native application for Windows or Linux from your code, was recently released offering substantial reduction in disk footprint. Excelsior is licensed commercially and they're investigating how they will handle the open sourcing of Java.
The major features of version 4.8 are a sharp reduction in disk footprint of applications, reduction of download size, and performance improvements for multi-core systems. Excelsior claims that medium-sized SWT applications built on Java SE 5 take only 20GB of disk space and can be run without installation while a medium-sized Swing application installation bundle has been reduced to less than 10MB. Excelsior has a comparison of download sizes of common applications available.
The release of Java under the GPL will require some changes to Excelsior JET as they have modified some of Sun's classes (Excelsior is built off of Sun's reference implementation). Excelsior has posted a blog entry about the path they are taking.
InfoQ covered the 4.5 release of Excelsior JET in July.