@amol.b - The disk space is really small for doing anything but running the server. I'm not sure how you're using dreamfactory, but if you're doing any storage you'll either need to up the disk space or move the data storage to another disk/machine.
MySQL/other DB engines store their data on a disk. You can't (shouldn't) delete it directly, but you could use delete or truncate operations in phpmyadmin to reclaim some of the space. Realize that the data would be lost though. My guess is that the actual data is the culprit.
If you're using dreamfactory as an FTP, those files are likely to eat up a lot of space.
Unless something is screwy with your configuration (you're getting a lot of errors or you have the log level set to verbose), the log files shouldn't get in your way. They will be on the order of MB, not GB.
As long as the ports are open in the firewalls and you have a proper connection string, DreamFactory can connect to a database or FTP server that isn't on its local machine. We actually have DreamFactory using its internal database only for user information - all the heavy data (TBs) is stored on other machines on the network.