Cannot defrag nor create new files/folders in XP as Administrator.

I am using Windows XP SP1 as an Administrator (with full control and
under the Administrators group), and yet the system won't allow me to
defragment (with the stock disk defragmenter) and create new files or
folders on the boot volume or partition -- the C drive.

When I do try to defrag I get the following error message:
"Disk Defragmenter cannot defragment this read-only volume:
(C)"

And, when I try to create a new folder on that partition I get the
following error message:
"Unable to create the folder 'New Folder'"

"Access is denied"

I don't know exactly when this problem began as I defragment once
every 2 months (approximately) and rarely create new files or folders
on my boot partition/volume. All my other NTFS partitions do not
restrict my actions in any way. Why would just the boot partition
restrict my permissions when I am logged in as an Admin with full
control permissions?

PS BTW Raxco's PerfectDisk will allow me to defragment the C volume.