I was having exactly the same problem with an almost identical setup: latest iTunes (12.7.4.80) on Windows10 and iPhone just updated iOS (11.3.1). However patience has finally worked. I simply left the PC apparently frozen on Reading photos from pictures in the next to last stage of the Sync. Perhaps patience is the solution (really needs a lot). It has taken 20 minutes short of 7 hours to "read" 5139 photos from the PC directory. Now the iTunes app is copying the 5139 photos. It's up to 3000 copied in the time I take to sign in and write this note.
While this seems to be working for me, 7 hours to read a PC directory with 5000 photos in 122 folders is really ridiculous. Some of the other posts write of 10000 and even 35000 photos. At this rate those people will need days to do the Sync.
Maybe the real problem is that the "read" step is so slow that it appears to have frozen, when in fact the process is ongoing but unacceptably slow and users are stopping the Sync before it has finished.
Now the Sync has finished and all photos have been copied to my iPhone. All the 122 folders are now in my iPhone as albums.
Maybe the reason that Apple have not produced a solution yet is they're looking in the wrong place. Apple should try looking at why the iTunes "Reading from photo_folder" is so slow that it looks as if it has frozen.
Cheers
Ian