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Help with Shrinking Exhange 2003 Database

We are running a Exchange 2003 mail server and I am starting to run out of space and need some assistance.  Below are the key points:

1. Database size limit set in the registry is 70 Gigs.

2. The free space on the physical disc where the database file and logs are kept is 1.5 Gigs.

3. The total size of all of the mailboxes recently exceeded 70 Gigs and was causing the mail store to be detached when maintenance ran early in the AM.  

A few days ago, I requested that users go in and delete any messages that were no longer needed and also empty their deleted items folder.  Between all of the users they probably removed 10-15 Gigs of email messages.  

Right now, the priv1.edb file is 68 Gigs and the priv1.stm is 15.8 Gigs.  Do I need to perform an offline defrag to recover the space created by the users deleting old messages?
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It is my understanding that there needs to be 110% physical free space available on the disc to do an offline defrag.  Obviously, I don't have that much space available on the Exchange server.  Am I able to move the database to a network drive and run the defrag from there?  Or, is there anything else that I can do to the database while it is still on the Exchange server to shrink it?
Yes, you can move the DB to a network drive.  The DB will not shrink any other way.
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Event 1221 is saying that there is 1.6 Gigs of free space after online defragmentation has terminated.  Since it says that the defrag has terminated, does this mean that it completed or was terminated for one reason or another before it could complete?

As I stated before, there is currently 1.6 Gigs of free space on the physical drive.  However, the past few mornings the database store has been shutdown due to lack of free space caused by the creation of .log files in the MDBDATA folder.  Is it safe to remove these log files to free up space so that I can bring the mailbox store back online?
Never touch log files.
Use backup utility and backup exchange, so that log files will get automatically purged.
For example using NTbackup in windows 2003 (Inbuilt) and taking information store backup will purge logs.
In windows 2008 this was replaced by windows backup utility which will do the same business.