The only thing I see on Google are some timeout problems in 10.6.3: every 65k apple events you get a timeout, probably a problem with rolling over apple event ids. I sincerely doubt that's the problem here, though; you won't be running through 65k apple events in the course of a few hours. However, can you point me to some more specific commentary?
That being said, I had a thought (always a dangerous thing...). The script creates a list of POSIX paths in System Events, then starts processing that list outside of System Events. It's possible that that list of POSIX paths is created by reference rather than as a simple list of text items, and if so, then when SE quits itself - which it will do after (I think) 15 minutes of inactivity - the by-reference list items might break, hanging the script. That's easy to test: change the beginning of the script to reed so:
on opentheFolders
tell application "System Events" to set quit delay to 0
-- rest of script
set quit delay to 0 tells System Events to stay open indefinitely (which is not a problem; I leave SE running 24/7 and it's never caused issues). You could add another line at the end of the script telling SE to quit, if you so desire.