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If the remote server floods us with terminal data enthusiastically enough, it can saturate us with input data, completely locking out the local GUI (at least on Windows). The appearance is that PuTTY appears to hang: it consumes as much CPU as it can, the terminal display does not update, and the GUI (keyboard, menus etc) is unresponsive. If and when the stream of data abates, PuTTY becomes responsive again.
This crept in somewhere between 0.57 and 0.58.
I (JTN) seem to recall noticing that some code which periodically gave the GUI a chance to update disappeared in some upheaval or other, but I didn't follow it up at the time and haven't got round to digging it up again.
SGT, 2007-01-07: I think this came in at r4906, when I
pending_netevent mechanism in the process
of setting up the new timing infrastructure. Putting it back in
seems to solve it.