A small toll, one that is worth defragmenting every month or so or after any major churning of your drive (such as an OS upgrade). Also, one thing that makes a huge difference is how you partition your drives. If you have a single drive partition for OS and for programs and for data, then you're going to have more problems with fragmentation than if you have a partition for your OS, a separate partition for your programs and a third for data.
My experience with various installs of XP suggests that unless the installer is savey enough to match the partitions to the physical structure of the drive, separate partitions ensures that performance can never get above mediocre. There's little performance difference between a drive hunting all over the drive for one file, and shuttling between two disparate partitions to access two contigous files simultaneously.
A separate *physical drive*, however, works wonders. Particularly when the swapfile is put onto it.
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