Agreed, you have to be careful with defragging and disk encryption. That's another reason why I've continued with Diskeeper after checking up on it.
http://www.diskeeperblog.com/archive...mentation.html
Recently, I've started using Truecrypt (it's free and good) for encrypting a 160GB harddrive where I store my personal financial records as well as a few research files from my workplace (lab). None of these are particularly sensitive files and the sky won't come crashing down if they are lost, but I like to keep them safe nonetheless. When I need to defrag these files (rarely), I mount the volume in Truecrypt and defrag using Diskeeper. So far, works without a hitch.