Update
The problem seams to be with the code. I have tried to remove all the pictures and the error still presists. I have managed to recreate the error by searching a term then going to a place I know the problem will occur. The 11MB file compresses down to about 5MB in mobi when there is no pictures. I will try to use callibre instead for creating the ePub, to see if that will remove the freezes. The ePub displays nicely in Mobipocket reader with no problems.
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