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We first study the capacity of Nakagami multipath fading (NMF) channels with an average power constraint for three power and rate adaptation policies. We obtain closed-form solutions for NMF channel capacity for each power and rate adaptation strategy. Results show that rate adaptation is the key to increasing link spectral efficiency. We then analyze the performance of practical constant-power variable-rate M-QAM schemes over NMF channels. We obtain closed-form expressions for the outage probability, spectral efficiency and average bit-error-rate (BER) assuming perfect channel estimation and negligible time delay between channel estimation and signal set adaptation. We also analyze the impact of time delay on the BER of adaptive M-QAM.