We use a StarWind SAN which has the concept of thin-provisioned disks that grow as needed. You can allocate a 4TB drive but it starts off tiny and grows as blocks are written to the virtual disk (via iSCSI).
The virtual disk used for our main file system has grown to 1.5TB and has plenty of virtual space left (2.5TB) but disk space on the SAN is another matter - it's getting a bit tight. That's the downside of thin provisioning - you can overcommit disk space.
So we're busy archiving old folders off the main disk system to the archive area.
However, this will only make any difference if Windows 2008 re-uses the deleted blocks before it adds new blocks to the disk when new files are added.
Is this the case or are we wasting time archiving (aside from the benefit of keeping things tidy) and need to consider expanding the SAN disk soon?
What you're looking for is actually called "thin reclamation", a process where the server OS tells the underlying storage when it has unmapped a block, even if it's not been zeroed out. Windows 2008 can be configured to act this way with some vendors, however (at least the last time I read about someone testing starwind) not yours.
I believe the decision of where to write new data to disk is not configurable in Windows. I'm pretty sure that it's complex enough that you wouldn't want to configure it lightly, though. In any case, you have to assume that Windows will write where it wants regardless of what the back-end storage is up to.
If you do delete a large quantity of files, consider migrating them to another thin provisioned LUN. It's a terrible waste of time if you're going to be doing this frequently, but it'll buy you enough time to grow your storage hardware or decide on a more permanent solution.
Check with the vendor but you are likely wasting your time archiving.
The allocated space to the LUN will not shrink by virtue of deleting files in Windows. Note that the allocated space to the LUN is different than the size of the LUN itself. If you thin provision a 100GB LUN, and write 10GB of data to it, the SAN will allocate 10GB worth of raw disk blocks on its underlying disks to the LUN. Then, when Windows wants to write to a new block, this grows the % of space on your thin LUN that becomes allocated/provisioned. Over time, as Windows requests to write to pristine (never-touched) blocks, those blocks will be allocated by the SAN from its global pool of unused blocks, and the allocated/provisioned size of the LUN will increase further.
Eventually with enough data churn, a thin provisioned LUN will become thick provisioned. It may take a long time, but it depends entirely on the OS's behavior.
Without special software (that basil has mentioned), the SAN has no way of knowing which blocks can be reclaimed, as the SAN can't "see" NTFS (or any other filesystem) by itself. Additionally, most of the time you need to have this software running in Windows before the volume becomes thickly provisioned, but again check with the vendor.
In general, thin provisioning buys you time (you don't have to allocate all your storage at the get-go) but eventually you will need to back your volumes 100% with storage.
Note, my understanding is that Linux does prefer to overwrite blocks instead of using pristine ones, but I don't have a reference to back that up.