Is there a way to make the VM smaller?
not sure why the image file is so big.
What is the problem that you are having? Downloading a large file, uploading the image to your hypervisor?
If, as an example, you were using VmWare Esxi as your hypervisor you might find that the web client will not allow uploading large images. You can do this with an FTP client once you allow ssh connections from the VmWare console.