Several instantaneous optimization strategies for rate and/or power allocation in the coded V-BLAST are studied analytically. Outage probabilities and system capacities of these strategies in a spatial multiplexing system are compared under generic settings. The conventional waterfilling algorithm is shown to be suboptimal for the coded V-BLAST and a new algorithm ("fractional water-filling") is proposed, which simultaneously maximizes the system capacity and minimizes the outage probability. Closed-form performance analysis of the considered algorithms is given, and the fractional water-filling algorithm is shown to attain the full MIMO channel diversity, significantly outperforming other strategies. Many of the results also apply to gener...