I mess around with mods a lot and stat new save games often, so inbetween playthrougths, after downloading, modifying or installing mods, I use WinContig (a free defragmenter tool) to defrag my mod files and main save file for performance reasons.

However, I heard that since I use Windows 7 I really don't need to defragment as much, but considering how bloated my New Vegas saves get, I noticed a somewhat lower rate of save file corruption or save file load crashing since I started defragging like this, and I don't regularly give my whole drive a defrag, just the files I modify quite a bit, and since I've noticed virtually everything I download from the web is heavily fragmented on arrival, I defrag all my downloaded mods before opening them (in fact I do this to any large files I download from the internet like streaming audio/video, which I found is notorious for fragmenting), and if I've modified large mods, I defrag them before starting another game session to speed load time.

Regardless, I heard from some sources frequent defragmenting is bad idea, and while I noticed a decrease in my save file corruption and slightly quicker load times, is my current policy good or bad overall, especially in regards to FNV, and in general is what I'm doing wise at all?

That isn't really true, Windows 7 still use the http://en.wikipedia.org/wiki/NTFS as Windows XP, so they are very similiar in that regard.

Thanks for clarifying that.

That said, is what I'm doing having any real effect on keeping my game performance (and my OS performance for that matter) high?

What is the size of your hard drive? How much used space vs free space? What does a defrag anolysis (not the actual defrag operation) say in the windows 7 defrag program?
What is your definition of "heavily fragmented"?

You shouldn't have to run a defragger over and over again. Unless your drive is near capacity and the entire thing is heavily fragmented in which case you should create some space and run the
windows 7 defragger over the entire drive.

The defrag system for windows 7 vs windows xp is somewhat different. I believe windows 7 won't defrag sufficiently large fragments (64MB?). Data is typically read in chunks.