It is entirely possible that SP can exclude free space, but I saw no option to do so. On other hand, I didn't read the manual, or even look in the manual. In fact, I don't even know if there is a manual. I bought online and downloaded after good reviews. The speed of product impressed. Then I did a couple of restores (same machine, different times) which worked well, but in each case required a partition the same size as the one from which the backup was taken.
Both backups were made live from within Windows. Both restores were from the SP Recovery Environment. Both restores were done with item (2) on the menu, the "legacy" setup, which I chose because I'm running XP not Vista and the first item said something about Vista.
With the exception of SPD not making a backup of only the data on a drive, everything about SPD has worked perfectly so far.