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I have this problem too...
Not only can I not defrag but I can't scan disk either!
I get "Scandisk encountered a data error while reading the FAT drive on drive C"
EMM 386 not installed
XMS manager not present
The following file is missing or corrupted C:\windows\himem.sys
I think it's corrputed because I'm pretty sure I still have the himem.sys file on my pc, so at least it's still there.
I also get some msg about bad boot sectors on my drive, and I have difficulty loading windows.
Is my pc still "save able" or is it hopeless? Sorry to intrude on your thread but I thought I would bring it up because I'm having similar problems.
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