You can downsize a disk created through snapdrive on a windows 2008 system. You have this option available from SDW 6.1 onwards.
Just select the resize option from SDW for any disk and you can see the maximum and minimum sizes allowed to resize the disk.
If you select any size smaller than the original size, the disk gets shrinked (downsized).
However the above holds good only for windows 2008.
If you want to achieve the same on windows 2003, you cannot do it through SDW. You might have to create a disk of smaller size and copy the original data back to it.