I tried this on my system and found that it worked with some applications and it did not work with others. In the applications that did not work, if you close the application manually, the vi will then start the delay timer and finish its execution, you can see the command window pop up for the kill.
Here are some applications that this vi works with:
winword.exe
excel.exe
visio.exe
wordpad.exe
Here are some applications that do not work:
mspaint.exe
notepad.exe
calc.exe
My guess is this: It seems like the vi waits for some acknowledgement from the application that the open was successful. Those that did not work never sent acknowledgement, and the vi gets hung up on the first System Exec call. When the app is closed manually, the Sys Exec gets something and the vi continues.