I converted my .vmdk to .qcow2 using "qemu-img convert vmfile.vmkd -O qcow2 vmfile.qcow2".
Here are my shrink commands. MAKE BACKUPS FIRST!
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#!/bin/bash
# Run as root in VM
service apache2 stop
service mysql stop
#dd fill all of the unused space with zeros for qcow2 compression
dd if=/dev/zero of=/tmp/zerofile
sync
rm -f /tmp/zerofile
shutdown -h 0
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#!/bin/bash
# Run as root on Proxmox
qemu-img convert /ssd/100/vm-100-disk-1.qcow2 -O qcow2 /var/lib/vz/images/100/vm-100-disk-1.qcow2.small
mv /var/lib/vz/images/100/vm-100-disk-1.qcow2 /var/lib/vz/images/100/vm-100-disk-1.qcow2.old
mv /var/lib/vz/images/100/vm-100-disk-1.qcow2.small /var/lib/vz/images/100/vm-100-disk-1.qcow2
qm start 100
# If all is ok then delete the old file
rm /var/lib/vz/images/100/vm-100-disk-1.qcow2.old
