I've looked @ the FAQ's, but why does Defraggler and "stock" windows Executive software report that the disk is very much fragmented after use of your program?
MyDefrag uses a unique concept called "wrap around fragmentation". The Windows defragmenter (and other defragmenters) do not know about this. If you want to analyze the disk with another defragmenter then use the MyDefrag Defragment Only script, it's the only script that is more or less compatible with other defragmenters. For more information about wrap-around fragmentation see the MyDefrag IgnoreWrapAroundFragmentation setting.
I know that it places things consecutively and on the fastest part of the disk - is this why?
MyDefrag also places important files at the beginning of the disk (files indexed by pefetch). I don't know how you tested, but keep in mind that after files have been moved, Windows has to reindex the prefetch files (happens usually after a restart or via the "rundll32 advapi32.dll, ProcessIdleTasks" command. Also notice that if you let Windows do an automatic layout of the prefetch files, these files will be moved again and mess up the optimization of the current defragger).
and if you could give another viewpoint on why so much disk space disappears after defrag... I deleted all but the most recent restore point, and the missing disk space just doesn't make sense to me yet.
I can't tell you what is happening here. MyDefrag uses the Windows API to move files. Windows manages the restore points and shadow copies.