You'd have to look into Microsoft, and see if the Xbox360 takes care of its own defragging. If it does, then there isn't anything to worry about. If there is NO defragging of any kind...that may put a limit on your machine. I have the same setup you do, and am doing the same thing. Luckily there isn't much defragging necessary when you're installing 6-7 gig chunks in iso (block) format. Keep at it man, dont worry about it, and if all fails, grab a mem card and a new HDD and you're good to go with no harm done :)
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