Almost exact same problem here - defrag works fine for awhile, then goes to 50% CPU (100% on one core), and defragging slows to a crawl. I have 250 GB of stuff on a 500 GB drive, and it's taken 3 hours of chugging so far. It looks like if you abort the defrag halfway through, and start over (CLOSING AN RE-OPENING DEFRAGGLER), defraggler works well again until it gets to about 50%, then slows to a crawl with huge CPU usage again. Specifically, it will take forever to do tiny files. A 20 MB .mp3 file will take 30 seconds to relocate, even though nothing is using it. This is a brand new Vista 64-bit install so things are fragmented, but not THAT bad!
If somebody wants a debug file or anything, let me know. Only changes from default are relocate files > 2GB to end of disc.
Very frustrating bug, best of luck squashing it!
EDIT: this is a laptop, and I am de-fragging the hard drive. Sorry that wasn't clear.