The stops responding part I understand, it has a habit of doing that as well as random crashes to desktop with no error messages or anything... I hate using it every so often, especially when something as simple as dragging & dropping a transition effect causes 10 minutes of work to go down the drain...
as to the clips, yeah it does that with most video's if their over a given length, don't know the specifics of why it does that, but it does that to me all the time when I load long FRAPS in game video clips into it... very frustrating to say the least, which is why many times I end up just opening Nero 6 & use that to make a quick video to upload somewhere.... but then again thats not free.
unfortunately I don't know of any real free programs that are similar and as good or better than Movie maker.