System Restore might be taking up the rest of your drive space too. Right click My Computer / Properties and go to the System Restore tab. I think it defaults to using the maximum space available.
If you're using inherited settings and need to make changes to the inherited file the changes are not read until the next time you connect. I'm pretty sure this was the case in 6.16 too
The Jet update was on Windows Update under recommended updates. I'm running Windows XP Pro and Office 2000. If you have something different it might not show up. A search on Microsoft's site for Jet U ...