The development of ultrashort optical pulse sources, exhibiting excellent temporal and spectral profiles, will play a crucial role in the performance of future optical time division multiplexed (OTDM) systems. In this paper, we demonstrate the difference in performance in 40- and 80-Gb/s OTDM systems between optical pulse sources based on a gain-switched laser whose pulses are compressed by a nonlinearly and linearly chirped fiber Bragg grating. The results achieved show that nonlinear chirp in the wings of the pulse leads to temporal pedestals formed on either side of the pulse when using the linearly chirped grating, whereas with the nonlinearly chirped grating, pedestals are essentially eliminated. In an OTDM system, these pedestals cause coherent interaction between neighboring channels, resulting in intensity fluctuations that lead to a power penalty of 1.5 dB (40 Gb/s) and 3.5 dB (80 Gb/s) in comparison to the case where the nonlinearly chirped grating is used. Simulations carried out with the aid of Virtual Photonics Inc. verify the results achieved.