[dnanian]

I honestly don't know how hdiutil compact operates, because I didn't write it, and don't have the source code. I'm certain that a lot of bit shuffling is going on... but it's not always necessary: I've never had to compact my own image, and I back up to it every night.

I think you're better off partitioning the drive. If it's mostly a scratch drive (and it sounds like it is), erasing it and partitioning shouldn't be a scary thing: it's quite simple to do!

Will it fail due to not enough space? In most cases, no. There are some situations where Smart Update can fail because you've moved around large files, and the order we "see" them shows us the new files before we find the files we delete... but it doesn't happen very often. (See the Troubleshooting section of the User's Guide for a description of this.)

Does that help?