I downloaded and ran v2.07.346. It defragged from 73 files to 13, and 628 total fragments to 90. Yet at the start it showed 43% fragmentation and still 43% when finished. Neither AVG Defrag nor Windows Defrag showed any fragmented files. I'm running W7 Home Premium 64bit.
☑ Ticking these 3 boxes 
will lower the frag count.
If afterward, it's not zero or close to zero, do a Boot Time Defrag. 
I ran a full defrag with those files excluded and got 7% defragmentation (3.0GB). I then ran the boot time defrag, and it’s now down to 0% fragmentation. Thanks very much for your help, Kroozer. Cheers, Rob