Don't worry too much about defragmentation for the moment - it does look like you have some adware/malware or other nasties lurking there.
If you can download from the Internet ok and get things to run I would get hold of an up-to-date copy of Adaware, install it and do a 'deep scan'
I would also recommend getting an up-to-date copy of spybot and running that too.
Most importantly get some anti-virus software running and do a full scan of all files(not just the default). If you are short of cash there are free AV packages such as AVG Free edition from Grisoft - just google 'AVG free edition' to get a link.
once you have run these, and run them again and again to make sure that you are clear then you can really start to look at the system's performance.
Now you need to get rid of as much clutter from the drives as possible. Open Windows Explorer and right-click on the C: drive and choose Properties and on the General tab it will show a pie-chart of free against used space. Click on the disk cleanup button and at least choose:
Temporary Internet Files
Offline webpages
Recycle bin
Temporary files
Web client/Publisher temporaryy files
That should free up some space.
Now take at look at what software is installed. Do you need all of it? Are there any programs that are never used? If you can uninstall some it too will free up space.
Take a look in My Documents and see if there is anything that can be got rid of there too.
Now that you have freed up some space you can contemplate defragging. Do run the defragmenter that comes with Windows, it's not very good but it is included in Windows and is better than nothing. Do look at the report that comes out of the defragger to see if the Page file is fragmented. If it is this will degrade system performance so you will need a special tool that can defrag the file at boot time. Microsoft recommend 'PageDefrag' from sysinternals and it can be downloaded from Microsoft at:-
PageDefrag v.32
I think that is enough for now. Please get back to us and let us know how things are progressing.