The Defrag in OneCare Tune-up is the Defrag found on the Windows Start Menu under Accessories/System Tools.
Yes, it executes in a timed mode and the report at the end of Tune-up nearly always reports that it didn't complete.
That report should be eliminated and we should have the option to turn ff Defrag.
The reason you saw high fragmentation when running a 3rd party tool is that each Defrag tool uses a different algorithm to determine the optimal position of the data. One program will report perfection and another run immediately after will report terrible fragmentation present.
Unless you commonly use very large files that are changed regularly, disk defragmentation is over-rated with today's drive speeds and fairly fast seek times.
-steve