DK does not report on free space fragmentation, but it consolidates free space quite well. I have just checked the D: drive on my XP system which has been running DK on auto and it is nicely consolidated.
I tested PD8 some weeks ago on the same system (but lightly fragmented E: drive) and something scary happened. Was running a defrag with smartplacement off, but free space consolidation enabled, and the windows screensaver kicked in after a few minutes of no mouse activity. Then the whole PC just locked up and the screensaver froze
...I tried moving the mouse around, but the system was not responding and the HDD LED was lit up.
Thought I was going to get a BSOD..was horrified and I could not even do a hard reset because PD was defragging and would lose data. I let it just run and fortunately after about 5 scary minutes, PD finished defragging and the system unfroze. Phew! Close call.
Needless to say, I have never tested PD with screensaver enabled after that :D. DK has never given me any such problem..its automatic mode is smoooth and trouble free...thats one reason why I recommend it so much.