[dnanian]

You can potentially recover unused space in the image using hdiutil and the "compact" option. You have to do this in the Terminal.

The syntax would be:

hdiutil compact image-file

So, if your image is called "My Happy Image.sparseimage" and it's stored on your desktop, you'd use:

hdiutil compact ~/Desktop/My\ Happy\ Image.sparseimage

(the backslashes escape the spaces, the "~" means "My Home Folder").

You can also just type:

hdiutil compact

(include a space at the end)

and then drag the image file into the Terminal -- OSX will automatically put the path in place for you.