I had the same problem with an "old" caviar of mine.. I concluded that there was a problem with the disk [hardware]..
lemme explain,
this drive was 60gb and partitioned with 55gb dedicated to windows programs and 5gb dedicated to a linux partition.. at first when I partitioned it during the linux install, the installation restarted my machine and found error upon error using fsck, anyways, somehow it let me boot into linux (and I had no problems after that on that partition). but when I booted into windows and placed some music, videos, and such on the NTFS partition, everything would work perfectly except transferring long videos and defragmentation. I know it could be that the GUI was only hanging while the disk was working, but I'd let it sit for hours at a time and then nothing happened, could this have been a defect with the disk cache?
anyways, to address your problem
do you have only one drive?
if not, is it doing this when defragging all drives, or just one single one?
also, if you downloaded windows, then there's a possibility that the defragmenter files became corrupt during the download or when you burnt the OS to a cd...
another possibility is that it could be your IDE channel or mobo, are you using old, worn, hardware? have the pins been pulled from the IDE channel when changing hardware?
also if you happen to have norton systemworks on your system, you can use speed disk to defrag and maybe this may work....