I thought I would note my results of some further tests and observations re. my question about "Safemode".
1) I used CCleaner to clean up everything I could including the Registry. Before using Defraggler in the next steps, I stopped my DSL line and my Anti-Virus (Symantec)program.
2) I used Defraggler to Defrag one-by-one the primary folders on the C:\ disk beginning with the primary Win2K folders ("Program Files", "Winnt", "I386", "Documents and Settings"). For most of these "primary Win2k" folders, Defraggler reported there were "some files were not defragged". This was not surprising to me because of my thoughts about "enque" expressed before. Also, as noted before, the "isolated "blue" squares out in the "white" area" remained.
3) I used Defraggler to Defrag the C:\ disk itself. It did not seem to change anything, including the message about "some files were not defragged".
4) I rebooted in "Safe Mode". I noted that (using MSConfig.exe) that all the non-Microsoft started tasks were stopped, so the many "enques" should have disappeared. I then repeated steps 1, 2, 3. The results seemed to be the same in that there were "files not defragged" and the same "isolated blue squares". However, I suspect it did some good.
5) I rebooted in standard mode. Then, because most of my personal (and most volatile) files are in about 6 folders, I moved them off to a memory stick; I repeated steps 1,2,3 (with the same apparent results); I moved the 6 folders back to the C:\disk. But, although the "blue squares" were still there, performance seems to be better.
Conclusion: from time to time (particularly when I do my semi-monthly backup of personal files), I will use the step 5 process.
I hope this information helps someone.
I would still like to see Defraggler give me more info on the "isolated blue squares".