First things first. A low space warning means you have 15% or less of drive space left. Defrag won't run in that little of room. Try this first.
Turn on all the features and keep running it till it finds nothing. You're going to be surprised at what it finds. It found like 90megs on mine first time out.
Ok next right click on the drive icon and look in the lower right corner. Click on the disk cleanup button. When the box opens up to show you a list check everything and tell it to go ahead. This might take a while if you have not used it before. Do this on all drives.
After all this do a defrag of all drives.
This should get you some elbow room. But I would either look into backing up some files to cd/dvd or getting a third drive and shuffling around some files.
Post back if you need more help.