By "freezes up" I mean that everything stops. For instance if Winamp is playing an MP3, it stops. Mouse cursor doesn't move. Etc.
This has been a big nuisance for me when using WinSCP, and has happened with every version from 2.3 to 3.5.
However, today I decided to try out the installer. I installed version 3.5 using the installer, and was pleasantly surprised when WinSCP logged in without any delay. And the right mouse button brings up the context menu without any delay.
So, from now on I will use the non-compressed exe file, and WinSCP will be an even better program than before. If somebody else is having similar problems, I hope this helps.