After troubleshooting this by throwing away iTunes preferences, restoring previous iTunes libraries from Time Machine, reinstalling 10.6.7 Combo and iTunes, reimaging the computer from scratch, the root of the cause finally appeared.
After reimaging the computer and running disk diagnostics, the hard disk was failing at times. I then determined that the hard drive had to be replaced but I wasn't sure if this would fix my iTunes smart playlist ratings problem.
I bought a new 500 gb drive to replace the original 120 gb drive, which was 4.5 years old.
After restoring from Time Machine and booting up into my main account, my iTunes smart playlist finally started working. I'm guessing that because I have an enormous iTunes library, something about pulling the data was straining the computer. That doesn't seem right though because creating/editing a smart playlist should just be a regular window without any labor intensive hd actions until you close it.