Didn't even know they had a forum. I guess I've been lucky with Defraggler, its always worked fine for me (much better than Windows defrag), but based on that thread, that might have been the exception.
Fuck me! Of course! I knew I forgot to do something! Yes, I had not disabled the indexing services before running the defrag. I don't have the Windows Search add-on installed, but the regular indexing service is usually enough to do what you describe. Again, I'll have to wait until I have some fragmented files to play with, but I think you might have hit on the problem.

I believe Sielle hit the nail on the head concerning the time factor. I turned off the indexing on all my machines as there was only about one second difference between on and off indexing for the few searches I do.

I run the Auslogics Optimize defrag on my XP box about once a month, it takes about 40 minutes. The first defrag with Auslogics will take a little longer but my weekly defrag takes the 10 -30 minutes depending on my activity

They update the Auslogics defragger every 4 to 6 weeks, the only downside is the nag to try their other software, minimal compared to AVG's nagware.

Or you can try Smart Defrag
http://www.iobit.com/iobitsmartdefrag.html

If you think there's anything left of the virus on the drive that's giving you grief then you could try Eraser. That'll do a good job of wiping the free space which might help put paid to whatever is causing the problem.

As mentioned earlier, Auslogics is a solid free defragger. As far as payware for XP, I always liked Diskeeper mainly for it's ability to pre-allocate space in advance for the Master File Table (MFT) as well as it's ability to defrag the MFT. These features aren't included with a lot of other payware.
When a fresh drive is formatted NTFS, the format only allocates a small amount (20MB to 40MB) for the MFT and as it needs to increase over time it will just write in whatever free space is available leaving fragmented chunks. This isn't an issue with Vista/Win 7 as their built-in degragger will defrag the MFT as well. XP and earlier didn't support this. With diskeeper and a fresh drive you could just pre-allocate +200MB in advance in optimal drive space pretty much negating that the MFT would ever really need defragging.

Auslogics disk defrag usually defrags my whole computer in about 10 minutes (220gigs) and optimizes it while defraggin in about an hour 30.

This definitely turned out to be the cause, spent a couple hours thrashing my data drive and got it good and fragmented. Made sure indexing was totally disabled and ran a defrag, took under a half hour to complete with 100+ gigs of data 57% fragmented. You get a cookie!

Even with indexing off some commercial defraggers take a long time in the more complex modes....Ultimatedefrag 3 for example. If you do a custom file placement(placing files on certain hdd sectors/etc or at the beginning/end of the disk), and a heavy defrag it can take a few hours.

Good to see you did it right though.

Only gripe I have with Ultimatedefrag is that sometimes if you interrupt the defrag(crash/etc) while it's moving system files it can mess up the OS.

YAY cookies!!! NOMNOMNOMNOM!

Glad you managed to track it down to exactly what was wrong. :)