How do you edit properly with vegas in such a way that your video runs for an hour or two but has lower storage or takes little storage space?
Forget the whole concept of "takes little storage space". Ostensibly, you're working with video now. Video eats storage. If you want an answer to a detailed question about optimization, then start on this page and focus on B and C.
Does this video help?
You can make an hour or more long video take up less space on your hard drive, but the more you compress, the worse your video will look. You adjust it by setting the bitrate of your output format lower or higher. For 1080p, I wouldn't go below 6-8 mbps at the lowest. 12-16 recommended.