PPP - the system files are stored on the hard drive during installation, presumably on an empty disk, so will be at the start of the filesystem. Unless they are deleted then re-added this is where they will stay. If memory serves correctly, the blocks in which these files are stored are marked as immovable...although not sure if that's Windows-version-dependent or even correct
Regarding defragging..some say you should do it frequently, some say it's a waste of time. I've never been bothered to work out performance stat's myself though.
IMO once per month should be sufficient, unless files are created and delete d on your disk frequently (e.g. if you do video editing or download lots of stuff then transfer to another drive/storage medium,) especially if you often get close to a full disk.