Windows XP very slow after running a long defrag!!!

Hello, everyone. I am running Windows XP Home SP3 on a P4 3 GHz computer.

I have 2 drives in my system, the C drive for the OS and Software, and the J drive for files. A couple days ago, I ran disk defragmenter on the C drive, as it had not been run for many months. (I know I ran it once since a fresh install of Windows on Oct. 11, 2011.) Only 33.6 GB of a 466 (500 GB) hardrive had been used, and like I said, only the OS, software, and temp internet files get stored on that drive.

I set disk defragmenter to run and left for the store. When I came back about 2 hours later, it was at 55% (Compacting Files). It stayed like that probably for another hour. Finally it finished, and said some files could not be defragmented, but it was only a log file from AVG.

The next day when booting the computer, it took at least twice as long to get past the Windows loading screen, twice as long to load the desktop, and everything (including unistalling and installing software) takes more than twice as long too!!

The CPU usage which used to be at 0% during inactivity, now rises frequently to 5-7%.

I am almost positive this is not a virus issue, as I am excessively careful while browsing, and I scanned twice with AVG Free 2012 and no threats were found. (However, the day before AVG claimed it blocked a threat on a harmless website, and it labelled the threat as Java Script Obfuscation.)

Is it possible I fried the hard drive by letting it stay in that compacting mode for 3 hours? Maybe introduced a bad sector? The Seagate hard drive is only 10 months old, and was a replacement drive for a bad Seagate.

As a behaviour note: When installing familiar software, the "loading bar" goes much, much slower than it used to, then occasionally speeds back up, then slows down again.

Any advice would be greatly appreciated!!

Thank you,
Adam