This is quiet difficult to reproduce, but I use the "Keep remote directory up to date" practically all the time. The problem is the WinSCP window becomes slow to response after a while of using it.
This is most annoying when using VirtuaWin (Open Source) virtual desktops, since it cannot hide or unhide the window when it's unresponsive. It keeps saying me it's waiting for the WinSCP window to become responsive again.
It does work after I wait several seconds between change of desktops, or as I have gotten used to stop the synchronization.
I suspect it's a threading problem, the WinSCP main window that takes the minimize/restore/show/hide commands gets somehow bogged when running synchronization for a long time.
Btw, VirtuaWin works very well with other programs such as Adobe Photoshop, Eclipse, etc. which are way more resource hungry programs.
This is not a new problem, it's been in WinSCP for ages.