I ran CCleaner and now have massive deframentation on both patitions ... And cannot defragment. It says the biggest problems are in Documents and Settings, but I can't delete anything to do with CCleaner ... can't get a 'merge' to appear by right clicking anything....

Am I going to have to reformat to get my system working again?

Try running chkdisk and then see if you can defrag. If you don't know how to use chkdisk here are some pretty good instructions.
http://www.ferris.edu/tac/SoftwareHardware/00027000.cfm

If that doesn't work let me know.

I ran chkdisk, disc clean up, tried restoration... (that didn't work, but I don't know if that had anything to do with this problem or not... I don't have Registry Mechanic set to 'auto backup', but in the past, it stole the job....)
I had a 'back up' file, probably on both partitions and that has some of the stuff in it that I can't delete... I have spent hours trying to delete everything that might be connected and when I get the warning that either I can't because some other program is using it or it might disable a program I need, I'm afraid to go ahead for fear that it really will mess up something I don't want to screw up!