Yes, that looks like some sort of error with the files or the file system indeed. Quite odd, because the script was tested on XP and none of my testers reported problems with it.
I already found that the script doesn't check if the folder exists, as it uses the same folder for the encryption and decryption. A stupid mistake of me, yes, but because the same thing seems to happen when you create the folder yourself, the cause should lie somewhere else... unfortunately, I can't figure out where at the moment.
Well, since it hangs on the last step, I think you can try to copy the temporary file manually to your destination. My apologies for all this trouble, nila. Life of a script developer can be tough.
/ 
