So today I installed VMware Server on my work PC, and set up a virtual machine. In doing this, I had VMware Server allocate 12 GBs of hard drive space for use by the virtual machine. Immediately on doing this, performance on my PC took a dump.
The following is a screen capture I took after I defragmented the hard drive. The top line is “before,” the bottom “after.” The red parts in the first line are the fragmented parts, and the white space is empty space on the hard drive.

As you can see, it looks like Windows would have had to go out of it’s way to fragment files.
If you made me a tshirt with the defragmenting lines on it, I’d wear it.