I know it makes a difference on the junky old boxes we have here at work.
NT4, sp5, Office 2000, Nav 5, several SMS services running, several IE windows open at the same time and all the corporate junk.
Frequent lockups....all on a 200mhz PC..some have never been defragged..1st time to defrag takes about 4 hrs
The customers call back to say the PC's are extremely faster than they were before so its noticable here.
At home, I cant tell any dfifference on my XP or 2000 boxes..but then again, Defrag runs on Tuesday and Thursdays each week for me.