Same here - defraggler.exe fails to analyze and defrag my primary NTFS partition (C: with win XP/SP3 and most programs). It works on my second partition (logical NTFS use for data mainly). defraggler works on C: in safe mode, so you could try that (safe mode), and df.exe always works in any mode.
The other day, I ran msconfig, chose 'selective startup' from the general tab, and unchecked win.ini, system.ini and startup items. At first defraggler.exe worked, so I enabled win.ini and rebooted, ran defraggler, and at first things were looking good. i think it worked and I defragged something, but then either the defragging or something else messed up some security permissions; i couldn't run anything so I toggled the 'use simple folder sharing' function, maybe something else too, and I had access again but defraggler stopped working. now it doesn't even work with everything unchecked from msconfig, except system services... i can only use it in safe mode.
let us know if you do the safe mode and msconfig thing, and figure out what program, service or driver conflicts with defraggler. fwiw, i use rising anti-virus, online armor firewall and acronis true image.