There used to be an undocumented win32 function called 'PathSetDlgItemPath'.

A quick google for that function at ms.com turns up this page; and the first line of the description says that this is the function that underlies it.

Looking at the example for the latter page, its functionality can be described as: throw away characters, preceding the right-most backslash until the specified width is met; or, only ... is left preceding that backslash. (Ignoring that it uses pixels and the current font.)

So, a simple perl implementation might be:

#! perl -slw
use strict;

sub compactPath {
    my( $p, $n ) = @_;
    my $discard = length( $p ) - $n + 3;
    my $min = $p =~ m[\\[^\\]+$];
    $p =~ s[.{$min,$discard}(?=\\[^\\]+$)][...];
    return $p;
}

my $path = "C:\\path1\\path2\\sample.txt";;
print $path;
print compactPath( $path, $_ ) for reverse 0 .. length $path;

__END__
C:\test>junk47
C:\path1\path2\sample.txt
C:\path1\pa...\sample.txt
C:\path1\p...\sample.txt
C:\path1\...\sample.txt
C:\path1...\sample.txt
C:\path...\sample.txt
C:\pat...\sample.txt
C:\pa...\sample.txt
C:\p...\sample.txt
C:\...\sample.txt
C:...\sample.txt
C...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
...\sample.txt
[download]

Does that meet your expectations?