If logging off and back on fixes the problem, I don't think it's caused by fragmentation. Still it's a good idea to defragment occasionally.
As mentioned earlier, you could be running out of memory. Either because you don't have enough to start with, or there is a memory leak. Maybe you could use Task Manager or some oher program to check this.
Western Digital has a good hard drive diagnostic you can run under XP:
http://support.wdc.com/download/inde...&pid=15&swid=3
I run it every couple of weeks because it can usually spot problems before the disk becomes unusable.