VS Pro x8 becomes unresponsive when adding image

[Sponge]

I created a video using multiple clips from a Sony action cam. I was able to edit everything (split clips, add some effects, titles, etc.) just fine.

When I add a transparent PNG (or GIF) image to the Overlay Track (second video track), the app becomes unresponsive. I can select the image in the preview window, but I can't drag it or resize it. Also, I can no longer get the play function to work, nor other shuttle controls (although the buttons "animate" when I hover over or click them). I can still see tool tips and I can select individual clips along the timeline.

After maybe 5 minutes, I can once again access all functions. But if I click the image I added to the timeline (wither in the timeline or in the preview window), the program becomes unresponsive again.

I have tried restarting the app, restarting Windows, using a different image, using a different image type (JPG), re-saving the project under a new name and editing that version ... all attempts end in the same result.

I recently did the Win10 Pro 64-bit update, and that's when I noticed the issue. Although, I haven't used VS in a few months and when I loaded it, I got the dialog box asking me to DL service pack 3. I did and got an error toward the end of the update. I restarted my PC, re-opened VS and was again prompted to install service pack 3. This time, success.

My PC is relatively new and certainly a beast - Core i7-4790 CPU with 32GB RAM and dual SSDs. That can't be the issue.

Appreciate the help.