Oh yes they do. NTFS slows down tremendously. I have seen the transfer rates drop from xxMB/s to < 100kB/s because of fragmentation. A high-speed disk may no longer even manage to keep up with a CD or DVD burner at 1x speed. But the issue is very much affected by the size of the files you work with, in relation to the amount of free space. As soon as you get in a situation where the files you work with are larger than the largest free space region, they very quickly degenerate. You may quickly end up with a 1TB disk with 100GB free but each free block being 1MB or smaller. NTFS is bad at handling multiple concurrent file creations.

EXT2/3 or ReiserFS seems to behave way better. I have never seen any of them degenerate like NTFS. And I regularly see NTFS degenerate, requiring defragmenting. And you can't really defragment with the built-in defragmenter. It just tries to make existing files contiguous, but doesn't defragment the free space, so the next time you try to create a large file, it will be heavilly fragmented. Having a 5GB file with 2000 fragments isn't directly fun, if you need to process the contents of the file again, and again, and again - each time hearing the HDD heads jumping all over the place while the file is too large for the disk cache to remember anything since the previous run.

Edit: Oops. Somewhere a GB/s crept into the text. No, I don't have that fast disks. 2GB/min of average transfer speeds is more common.