So you'd have to defrag after re-bloating, to make all the files contiguous again. That tool already exists, and the re-bloater could just call it.

Sure, but defrag is a very slow process, especially if you're re-bloating (since it requires shifting things to make space), and definitely not something that could happen in the background, as the player is playing. Re-bloating definitely wouldn't be good for a quick "Ok, I'm ready to play!".