Matthew,

What you have effectively by running the backup log command is emptied the water out of a bucket.  The contents of the bucket are gone, but the bucket still remains, if you catch my drift.

To shrink the file, you must now run the following...

dbcc shrinkfile (<virtual file name here> )

and it will then shrink back to it's original size.  To find the virtual file name, run sp_helpfile from within the context of the target database.

Hope that helps,

Martin