WillyW:
I have tried all three; Win98, WinME, and Diskeeper Lite 7.0 (DKLite) defrag; and I am reporting from personal experience. I installed DKLite defrag on my WinME system and used it for many months. In the standard installation it coexists with the standard WinME defrag. If you access the defrag utility from the "tools" tab of the "properties" dialog of a logical disk, it serves up the DKLite utility. If you access the defrag utility from the Windows Start Menu, as in Start -> Programs -> Accessories -> System Tools -> Disk Defragmenter, it serves up the standard WinME defrag.
I use a small 512 MB USB Flash Drive to port files back and forth. I also use floppy disks for diagnostic tools. I like to keep them defragged for performance purposes. Since my flash drive is pretty full, I prefer to keep whatever space is available in a contiguous block at the end. DKLite did not do this for me and it does not support floppy drives (at least that's my recollection). Since I could never remember to defrag these from the "System Tools" submenu, I would always end up accessing the defrag utility twice before I got the right one. Because of the inconvenience to me I finally uninstalled DKLite.
That said, DKLite worked fine and is much faster than the standard Win9x/ME defrag utilities. The defrag tools for WinXP (obviously not for Win9x/ME systems) also leave "available" cluster gaps in the file system. They defrag files and do a pretty good job of packing them tight, but they won't sacrifice performance (total defrag time) to do it. Nor should they.
I, like you, wondered whether a first pass by DKLite could quickly defrag files while a second pass by the standard Windows defrag (WinME in my case) would finish the job. The answer is yes, it does. But not that fast. Window defrag spends a lot of time sliding file cluster blocks up to close gaps. I should also add that since I defrag regularly, I didn't have a lot of tiny defragged file pieces to put together, so not the best test. But for me it wasn't worth the effort.
Enough already... Try it you'll like it... It works as advertised... dahlarbear