Carl
It's unlikely that these two problems are related.

Your Defrag problem may be solved simply by booting to Safe Mode, and trying
the defrag from there.

The LFN error is a not uncommon one - what you need to do is make a note of
the name of the file and its path.

Depending on the exact nature  of the error the solution will vary - I'll
deal with the most likely scenario for a single file with an illegally long
name (rather than an extremely long path, with a short name - which is
likely to give a number of such errors, rather than just one)

first - say the file name is 1234567890abcd.......xyz.TXT

use the first 6 letters of the name, and add ~1, and the extension (.TXT,
here)
this will give you the 8.3 DOS filename - 123456~1.TXT

Reboot to DOS using your Startup disk

At the A:\> prompt, type
C:    (assuming Windows is installed on the C: drive)
then type
CD \xxxxx    (Note the space between the D and the \
where xxxx is the FULL path to the file (say
Windows\ystem\restore\this\is\a\demo) - the prompt should change to that,
and read
C:\Windows\ystem\restore\this\is\a\demo>

At the new prompt type
DIR 123456*.* (where 123456 are the first 6 letters for your filename)
If more than one file comes up - compare what's visible with what you know
of the filename
so that you know which one is which, and post back for more details (after
I've worked them out!<g>)If there's only one file listed, then type
REN 123456*.*    JUNKFILE.JNK

when the prompt returns,
remove your floppy disk, and reboot - then see if the scandisk runs without
further problems.

Such errors are often caused by spyware - download AdAware from
www.lavasoftusa.com, install, update, and run it to remove spyware, adware,
and other such nasties from your system.

HTH