We report wavelength-division-multiplexed (WDM) systems experiments with po
larization multiplexing at 40 Gb/s per channel and 0.8 bit/s/Hz spectral ef
ficiency designed to explore the worst case impairments caused by first-ord
er polarization-mode dispersion (PMD) in the fiber. Both polarization-divis
ion multiplexing using two polarizations at each wavelength and polarizatio
n interleaving where adjacent channels have orthogonal polarizations were e
xamined. Measured system penalties show that polarization multiplexing incr
eases the PMD sensitivity by approximately a factor of five due to coherent
crosstalk.