First off, I'm using Mac OS X 10.4.10 and Java 5. I'm not using the Microsoft Client (I renamed the directory so proper couldn't find it).
When I RDP to a box, sometimes I have to then RDP to another box from the first. (Think of a terminal server being visible to the Internet and then using it as a gateway to some internal boxes.) When I do that, proper locks up completely. I have to kill it. No more screen updates, and I don't think I'm transmitting any mouse or keyboard stuff back. CPU is not spiked. The lock up only happens when you first connect. After I kill it and return back, it's perfectly usable. I think the reason for the lockup is due to the little yellow banner that RDP shows from the top center of the screen. As it slides down (why did they have to animate that), that's when the lockup happens.
I've noticed a few times here on the LAN that it won't lock up. It's almost like when the connection to the box is fast enough, it'll manage to not hang. However, when we tunnel over the Internet to do RDP, that connection is not fast enough and it croaks.
This is what the screen looks like when it's locked up.