Have you tried doing the defrag in safe mode?
Do you have an xp disc (not an oem restore disc), if so try typing "sfc /scannow" (without the quotes) into a run dialog box. Hold down the windows key and press "R" to get the run box. It'll check your system files and replace any as required. If it needs to replace it'll ask for the xp disc so it can get the files from there. Should you not have a disc, it may be possible to access the files from the hdd if you have an i386 folder, but that requires a registry edit.