Here is the link to an intermediate release which should fix the problem with login when many unread items are in your account:
Could you test if this solves you login problems? If so I am sure I know the reason (this version is limited to 100 items at once which has been a number which worked fine on all if my tests).
In case it doesn't work it logs its state to
C:\Users\YOURUSERNAME\AppData\Roaming\Desktop Google Reader
(but I think and hope it should work for you).