The degree of performance improvement after a defrag would depend on the degree of fragmentation before the defrag. On the whole, I'd think there would be a detectable performance increase after defragmenting a heavily fragmented drive, especially for sequential read/write operations. Atleast, that's what I've noticed generally, but I have not conducted any scientific tests either.
From an anecodotal perspective, just last week, i defragmented my sis's year old XP pro laptop (that had never been defragged) and the increase in responsiveness was clearly detectable. Launching Opera used to take 10-15 seconds, but it's now down to 3-4 seconds (rough estimates). And I did not even do a 'proper' defrag, since I used the Windows utility; the PF and MFT are still in 3 or 4 pieces and overall file fragmentation is still 3x% on a 80GB drive.