Normally having the system restore enabled leads to many fragmented files in the system volume information folder. Nevertheless I think 40% is quite high even for that folder.
I'd probably look at the detailed report that the Defrag utility can generate. It can tell you what your most fragmented files are, but I would also add to the first reply, the following:
%WINDIR%\Prefetch --- the "Prefetch" folder is generated at each bootup and holds information related to programs launched during your Windows session. It is an attempt by Microsoft to make subsequent accesses to the referred file/program faster. The files in this folder get modified even with minimal use of the system.
Look at your Services that are set to run at Startup. Stop or Disable those that you do not need. Many services will cause disk accessing, even when your system is "idle".
If you have one hard drive (and most likely you do), then you might want to consider partitioning it, and putting your pagefile on a separate partition. The pagefile is accessed like physical memory, but since it's on the hard drive, this accessing (reading/writing/deleting) will cause fragmentation.
If you're saying that your laptop was off and the next time you booted up and ran defrag it showed 40%, then I think something is wrong. You may want to give more detail on applications you have installed.
The System volume folder had tons of entries, I also run VMWare, I am wondering is that 10 GB file is causing issues somehow. The fragmentation usually builds up over the course of a week. I have hardly been using my laptop and in the course of 2 weeks I have 20% file fragmentation currently...
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