More of a query than a problem, my laptop is just about a year old with a 40g hd, when I went to do a defrag it told me it was unnecessary, there's about 16g free on the drive, do I go ahead anyway or assume XP knows how to look after itself. Everything works fine, but it has been a little cranky just lately.
Its up to you, personally I defrag when it suits me just not when windows tells me I need to.
All that happens is if the drive is not badly fragmented it will take less time, it will still clear things up a bit.
When you say its been a bit cranky lately what do you mean? It could be time to do a bit of cleaning up the hard drive. I find deleting old programs then running ccleaner and then doing a defrag makes quite a difference sometimes.
I normally ignore the "no need to defrag", and I've just started using the free Auslogics defrag utility, which I must say does a very good job. I also always gain a percentage back no matter what windows says.