@Tim S.
Thank you for your efforts to help, it is appreciated. I have the settings below, setting the linker path does not make any difference in my case. I installed VS2010 to a non-default location as you can see (2nd partition on same HD, the C-partition was getting crowded). Not sure if XP vs. Win7 makes any difference.
<user_sets>
<msvc>
<NAME>
<str>
<![CDATA[MSVC]]>
</str>
</NAME>
<PARENT>
<str>
<![CDATA[msvc10]]>
</str>
</PARENT>
<INCLUDE_DIRS>
<str>
<![CDATA[C:\Program Files\Microsoft SDKs\Windows\v7.0A\Include;D:\zzSystem\Program Files\Microsoft Visual Studio 10.0\VC\include;]]>
</str>
</INCLUDE_DIRS>
<RES_INCLUDE_DIRS>
<str>
<![CDATA[C:\Program Files\Microsoft SDKs\Windows\v7.0A\Include;D:\zzSystem\Program Files\Microsoft Visual Studio 10.0\VC\include;]]>
</str>
</RES_INCLUDE_DIRS>
<LIBRARY_DIRS>
<str>
<![CDATA[C:\Program Files\Microsoft SDKs\Windows\v7.0A\Lib;D:\zzSystem\Program Files\Microsoft Visual Studio 10.0\VC\lib;]]>
</str>
</LIBRARY_DIRS>
<MASTER_PATH>
<str>
<![CDATA[D:\zzSystem\Program Files\Microsoft Visual Studio 10.0\VC]]>
</str>
</MASTER_PATH>
<EXTRA_PATHS>
<str>
<![CDATA[D:\zzSystem\Program Files\Microsoft Visual Studio 10.0\Common7\IDE;C:\Program Files\Microsoft SDKs\Windows\v7.0A\bin;]]>
</str>
</EXTRA_PATHS>
</msvc>
</user_sets>
One thing I found which may have helped my endless series of hangs and delays with this version was that I opened default.conf and deleted very long lists of references to wxWidgets types under <HeaderFixup>. It reduced the size of default.conf from almost 500 KB to about 70KB. If the default.conf file is being saved/reloaded constantly (is it?), it might cause freeze-ups in the GUI for all I know, and that is what I have been seeing.
I just tried deleting MinGW again, and miracles, I don't get the yellow pop-up errors anymore after that..... I have also played around with disabling as many plugins as possible to see if that could fix it. See attached screenshot of my list. Perhaps one of the disabled ones were causing troubles.
I still get strange delays during compilation, but after reducing the size of the default.conf file at least the GUI is more responsive.