Defrag W2000 not enough free space

I have a W2000 server. The C: drive is very fragmented according to the defrag program included with the server ( reports alot of red in the graph). I try to run the defrag and it error with “Your disk has 22% free space 0% is useable be disk defrag. Defrag needs at least 15% useable free space in order to run properly. Do you want to run anyway?” I run it but it does not improve the fragmented condition. There is no virus software and I am logged in as Administrator. I think the drive may be so fragmented it can’t get free space. Ideas???????
Any good 3rd party defrag programs for W2000 server??

Help

Thanks in advance