You could probably use a Linux LiveCD - I think the NTFS-3G driver that most major distributions now use to access Windows hard drives supports compressing and decompressing files. I don't know whether you'd be able to do it via the file manager, though - you're more likely to have to use a command-line utility to do something like that.
Once you get your system booting again, you'll find that performance really sucks on a compressed drive. I'd suggest getting a USB hard drive and shifting all the big stuff like photos, music and video files off onto that - they don't compress at all well anyway as the data in them is already compressed. Then you can decompress your drive and defrag it using MyDefrag (www.mydefrag.com) which is about a million times more effective than the built-in defragger in Windows (it'll need defragging quite seriously after being compressed).
Stephen