Server locking up

First up, get your syntax up to date

<CFSET ThisMonth = Month( Now())>
<CFSET ThisDay = Day(Now())>
<CFSET ThisYear = Year(Now())>

<cfinclude template="Navigation.cfm">
<CFOUTPUT>Inserting Mail on #SetServerDesc#</CFOUTPUT><br>

<cfdirectory action="list" directory="c:\cfusionmx\mail\undelivr\FromWEB1" name="Files" sort="datelastmodified desc">

<CFLOOP query="Files">
<CFPARAM name="InsertCount" default="0">
<cffile action="read" file="c:\cfusionmx\mail\undelivr\fromWEB1\#Files.Name#" variable="FileRead">
<CFQUERY name="InsMail" datasource="#Request.DSN#">
Insert Into _UndelivrEmail(
UE_Attributes
,UE_DateLastModified
,UE_Mode
,UE_Name
,UE_FileSize
,UE_Type
,UE_ServerDesc
,UE_EmailBody
)Values(
<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#Files.Attributes#">
,<cfqueryparam cfsqltype="CF_SQL_TIMESTAMP" value="#Files.DateLastModified#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#Files.Mode#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#Files.Name#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#Files.Size#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#Files.Type#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#SetServerDesc#">
,<cfqueryparam cfsqltype="CF_SQL_VARCHAR" value="#FileRead#">
)

</CFQUERY>
<CFSET InsertCount = InsertCount + 1>
</CFLOOP>

now..

How many files are you looping through here: <CFLOOP query="Files">

Next Check the server logs to see whats up. you should be able to loop through houndreds of files like that, and the insert should be near instant, so besides a few seconds wait if there are a TON of files, i can't see anything wrong ...i son't think....