And the livecd is just a 70MB zip file, interesting.
Plus, everything in the base system is in two copies, one for the boot environment and one for the installed version, similar to initramfs and RPMs for Linux.
Device drivers: Driver.cab is 60MB. Localizations: LANG folder takes 100MB. .NET Framework: 41MB. Various migration tools to upgrade from Win95: 32MB.
They probably never tried to reduce the size.
Also previously discussed here: https://news.ycombinator.com/item?id=14192353
It turns out that the overall Windows bloat due to XMP tags amounts to something like 5MB.