I will tell you what I tried to defragment the system reserved area.
1. Make the system reserved area an active partition by
assigning it a letter like other drives (Make it visible on My
Computer).
2. After doing this format this newly created partition. If
you explore it you will find nothing in it. But the System will show
that some part is occupied. Proceed with the formatting.
3. Even after formatting the drive will be displayed as partially occupied. It may happen that some more space is freed.
4. Now if you run the analyzer it will show 0% fragmented.(It happened for me atleast).
5. Now remove the letter assigned to the partition and make it invisible.
Although it works, try this at your own risk.
I found this method just while fiddling around with the OS.
As mentioned above it does not show significant improvement in the performance.