Generally, you should be able to run Defrag by simply restarting into Safe Mode and running it that way. But you might try cleaning things up a little in order to get it to run normally.
First, follow the procedures in the link below to eliminate unnecessry start up programs which could be causing conflicts and clean out junk files:
How To Shut Down Unnecessary Start Up Programs
How To Clean Unwanted Files From The Hard Drive
Next, use the link below to run Scandisk and Defrag.
What Do I Do When Scandisk and Defrag Won't Run In Win9.x/ME
Hope this helps.
I have a 633 e-machine with Windows ME. When I try to defragment, it just starts than goes into a loop and will not finish. Any ideas?