I guess the lack of response is that no one else is having similar problems, and it's always hard to guess at Windows problems.
It is interesting that it's hanging in AXE28X1.exe or AXE28X1_0.exe. The latter ( maybe the former ? ) runs after compilation completes, download is attempted but finds the 28X1/40X1 is version A.0 Firmware, and thus does a quick 'hot-fix re-compile' and another download is attempted. I would guess at something going 'odd' during download / re-compile, but I'm not sure what.
Can you confirm you're using a 28X1/40X1 and its firmware version.
Are you downloading into a Rev-Ed board or is it your own construction ?
If you are using USB-to-serial it may be worth trying a physical COM port. If you have a PICAXE which isn't a 28X1/40X1 or a later than A.0 Firmware version you can see if that works.
Do a number of cable tests ( View->Options ) to check that the cable is reliable.
Also check the power-supply.
Other things to try are ...
Virus Check, Disk Integrity Check, and make sure Full Memory Test is on at BIOS boot-up.
Check to see what tasks are running after a successful download; any AXE*.exe's left running.
Uninstalling the Programming Editor, re-boot, delete C:\Program Files\Programming Editor, re-boot, re-boot, re-install, re-boot and try again ( don't skip the re-boots ).
Remove any USB Bluetooth devices, uninstalling the Bluetooth drivers may be necessary.
As a last resort, re-installing XP with all USB and other devices unplugged, then install and test the Programming Editor before installing anything else.
Unfortunately there's no magical incantation and it is really going to ahve to be a case of trying various things to make it work. If you can move from a 28X1/40X1 or use a later Firmware version, that would take out one 'unknown' from the equation - That's where I'd start.