I'll just revive this thread because I have about the same problem.
The program nearly always fails do to thumbnails ... sometimes though, if I'm very lucky it succeeds. I really like your program, it's the first time I ever thought about donating or getting a activation key - though, I can not do that as long as it fails in 99% of the time (for some files).
I'll provide you with some more detailed information... maybe you'll find a reason and maybe also an answer to it
The Diag.log says nothing but the time plus "Process started".
System: Q6600, HD4850, 8GB DDR2, Vista_64
Concerning codecs, there is ffdshow (I think from CCCP).
So, this is why I can't believe the 5-sec thingy has anything to do with it - or what kind of PC do you expect people to have?
On the other hand, thumbnails are more likely to succeed, when I chose to make less pictures - very often though the progress bar stops after the first "block" (but actually it can happen at any time).
Look at these screens:
You can easily see by the activity when it freezes.
All I can do is to end the process and try it another time (or 100) times.
Most of my videos are x264 in mkv containers, I thought the file size probably has an influence too, but then again this file now only had 90 MB.
What about a version where you remove that 5-sec thingy (whats the point of that anyway?); just to make sure that this is not the cause?
Engine 1 or 2 doesn't make any difference.