Windows defrag looks to your "applog" directory for how and what files are accessed during a "normal" day of work... example: you open netscape and it will load the first 4k of that main file then go to another file, etc. When you run defrag, it moves that first 4k(or whatever the size may be, and program) to the beginning of the drive... essentially optimally fragmenting your hard drive. That's for 9x. But overall, when a file spans non-consecutive clusters on your drive, it pulls that file together... outside of your applog.
So, if you install an os, and defrag, it won't necisarily help you browse faster, check email quicker until you have used the machine some.