Agreed, though CE can only fit into tiny spaces if you hack away parts of the OS. When installin in truely tiny spaces it is usually for an embedded device with a spcific purpose so you can build a rom image with most things stripped out.
Modern CE - if you don't include any OS software components but all the files and dll's required to make the OS with GUI work - even if you compress the OS would like still take 12-16Mb of ROM.
IIRC CE has quite a lot in common with Win95.
I am currently building a custom rom for my StrongArm CPU'd HPC (like a mini netbook with 7" screen). So I know how big full CE with GUI and normal OS components and dll's is.
My problem is trying to fit all the software I want into the 32Mb rom now