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Never heard of the Kobo Loyalty program.
How old is your Touch? This is sounding like possibly a hardware issue rather than firmware. You might want to try downgrading to an older version of the firmware (you can find links in the developers forum at the top of the page) and see if it still happens. If it does then it's probably hardware. If not, that would point toward a firmware issue. One thing: make sure you factory reset and upgrade to the older firmware rather than trying to downgrade directly from current (possible database changes can mess with downgrading).
One other question: I know you said you have removed books, but are the freezes happening in the same book or have you tried several different books.
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