That can't be an apples-to-apples comparison. That's a factor of over 150-to-1. Not possible.
Even if MS took all their famously long variable names and chopped them down to 6 characters like Fortran, you couldn't get 150:1.
I suspect the 25MB Win7 number is just a bare kernel, whereas the 4GB Vista number must be everything including the applications that come with it.
Variable names don’t affect the length of executable code.
Remember, though, that that 25MB needs to have reverse compatibility with at least all Win32 programs [dating from the early 1990's] - because without backwards compatibility, a new kernel from Microsoft is no better than Linux or FreeBSD.
From there, the kernel will of course need forwards compatibility - through WinXP, ".NET", Win64, and "Aero/DRM" [or whatever].
With an expected timeframe of 2010, Microsoft might go ahead and ditch backwards compatibility with Win16, although that would leave literally gazillions of businesses [& their employees] without access to some older mission-critical apps.
My guess would be that that 25MB would merely provide an interface into which you could load older libraries, as necessary, to gain all of that reverse compatibility, and that if you were to load all of the older libraries, then you'd be right back at 4GB+.