This is not a common issue on Windows system but once users request for a fix on this problem this will be a pain in the ass.
Windows will not give more details on the error but only "Disk Defragment could not start"

Here are the steps you need to do :
1. Make sure that Virtual Memory paging file is not enabled
- Right click on My Computer > Properties > Advance Tab
- under Advance Tab > click on Settings under Perfomance category
- under Performance Options > click on Advace Tab
- under Virtual memory category click on Change ( make sure No paging file is not enabled )

2. Make sure windows Services for this application are activated
- goto Start > Run > type "services.msc" without ""
- locate DCOM Server Process Launcher make sure its status is Started
- locate Logical Disk Manager make sure its status is Started
Run Disk Deframent see if it will work

3. If step 1 and 2 doesn't work you need to re-install Defragment .dll
- goto Start > Run > type "regsvr32 dfrgui.dll" without "" and press Enter
- goto Start > Run > type "regsvr32 dfrgsnap.dll" without "" and press Enter
- goto My Computer on the menu tab goto Tools > Folder Options > View > enable Show hidden files and folder and click OK
- on My Computer > Windows > INF
- locate dfrg.inf or dfrg right click and choose Install
Run Disk Deframent see if it will work

4. I all 3 steps doesnt work try to re-install all windows system files
- goto Start > Run > type "SFC /SCANNOW" without "" this will require the Windows XP installation CD
- restart system and run Defragment again

5. If the above steps still doesnt work try to download Malwarebytes or any Malware remover application your system might be infected by malware which is blocking the Windows services to execute Defragment