I tried this too, with the same result. It can include the RTF to the library, but if I want to transfer it to the reader, than the Connect Reader application hangs.
The transfer time is clearly matters the size: bigger file size takes more time. But I transferred bigger RTF's already, no problem. This one is a 550 K file only.
And, when I transfer a big file, and I click on the Status, than I can see that it is "moving", the arrows are spinning. But with this file the full applicaiton is blocked, and knocked out. Nothing moves, it is not reacting to anything....