Kevin,

You can't remove the database's transaction log. It is a vital part of the database and required to meet the ACID properties. Now you can minimize the affects of the log. For SQL Server 7.0, set the Truncate Log On Checkpoint database option. When this option is enable SQL Server will remove the inactive portion of the log whenever a database checkpoint occurs.

For SQL Server 2000, setting the Recovery Model to 'Simple' achieves the same effect.

You'll need to shrink your transaction log in order to recovery the 850MB that's been allocated. Check out the topic Shrinking Transaction Logs in the BOL.

-Mike