Purging old backup / Volume Shadow Copy data from Vista

I am running Vista Business, and have an external 500Gb hard disk that I use
for backup & archival purposes. I use this drive for both file-based and
complete computer backups.

I am generally aware of how Volume Shadow Copy works (at least
conceptually), and have read a number of the Microsoft White Papers
concerning this technology. It is my understanding that VSS initially stores
a complete copy of each file (the gen1 version), but then only stores the
delta differences as additional VS copies are made (gen2, gen3, etc.).

If true, this would suggest that the recovery of a file would require all
generations to be intact, not just the latest copy. I would assume that if
the gen1 copy were purged, the later generations could not be used to
reconstruct the file because the later generations are just the difference.

According to the Microsoft site, both Vista backup methods (file-based and
complete computer) make extensive use of the VSS service, and my own
observations seem to confirm this. Naturally, as additional backups are run,
more disk space is used. Eventually, I will run out of space on my external
hard disk.

I have read that you can purge old backup points in Vista, but I have not
needed to experiment with this yet. There must be some reasonably effective
means of managing backups so that I do not run out of space. If my
assumptions above were correct, it would seem that purging old backup sets
could delete gen1 files rendering later versions useless (because the later
versions are just the difference).

Now – to the question…how can old data be purged while insuring that the
newer generations of data can be recovered?

Does anyone know of a resource that explains this, and also gives a best
practice?
Any assistance is appreciated!

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RichG