|"To become fragmented a file must grow in size."|
Not how it works. Just reading and rewriting to disk will fragment the file. This constantly happened with system files. It is one of the reasons why after a new install you have a fragmented system.
"File fragmentation isn't nearly as serious a problem as many people believe"
Moderate fragmentation is normal but a severely fragmented NTFS volume will cease to function. Only solution is wipe and reinstall. I have personally experienced this when a staff member didn't complete protocol with a group of communal computers.
I would agree its a needless worry about free space between files.
Windows defrag products are not like Netware which writes all files contigous to the disk.