three things come to mind...
1) you're up to date on service pack 3 (i.e. updates) right?
2) do you have network mappings to/from your c drive? If so, temporarily disable them (this isn't always an issue, but i've found that sometimes it can be)
3) Do you have "File paging" turned off?
Before I tell you how to turn on file paging, let me emphasize that i don't know why you'd have it turned off to begin with so i don't know what effects turning it on will have! Having said that, here are steps for turning on file paging (-- OR still follow these steps to _see_ if it's set or not but don't make any actual changes, it would at least let you know why it isn't running...
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Start -> Right-click "My Computer" -> Properties -> "Advanced" Tab -> "Performance" setting button -> "Advanced" tab -> "Virtual Memory" change button -> Look for the "No paging file" setting .... is that selected or unselected?
If selected, I don't think defragementer will run. Though, as said above, if you do have it selected, i don't know why you have it selected in the first place so I can't say what effects unselecting it will have. But at the very least, it will explain why it isn't running for you.
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