Vista - Differencing disks and disk space

How does a differencing disk handle deleting files from the disk which
is actually on the linked parent disk?

Example:

On the parent drive there is a 10 MB file. I delete this file when in a
VM which is using the differencing disk linked to the parent drive.

How will it mark this space as deleted in the differencing drive? Will
it assign 10 MB of diskspace (expanding the .vhd file) as a difference
or will it do something like "mark sector x to y as deleted"?

If it is the former will it be able to reuse that disk space?

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I have setup my current VPC setup so I have three levels of disks

- 1. Base o/s + office and other general programs
- 2. VS Studio ver X + SQL Server ver x - linked to 1.
- 3. One disk for each development project - linked to 2.

Seems to work fine, however the differencing disk 3 is growing at an
alarming rate. It is now 3.7 GB but actually only used 1.5-2 GB (disk
used up compared to start). Seems to grow a lot even with a few changes
to disk.

Makes me wonder if it is relaly such a good idea to use differencing
disks. AFAIK differencing disks can not be compacted so not possible to
regain "unused space".