I hope you are not trying to mass compile the entire LabVIEW directory. I will definately choke on several of the files it will find. If you have upgraded to 7.1.1, you should mass compile the vi.lib, instr.lib, user.lib and examples directories.
You could also have an error with the Paths settings. If it is searching an invalid path to find a subvi, that might cause the problem.
I suggest that you start small and try a single subdirectory like user.lib, then move on to instr.lib, then examples.