With a process monitor I could see that PDR11 was trying to do something with the Sports3.mp3 audio file that is in the "Audio" folder for that particular custom menu template. I decided to delete the two files in the Audio folder and then started PDR11 again. The next time I clicked the "Apply to All Pages" button, PDR11 did not freeze and applied the menu. I created a DVD with the menu, and it played back properly.
If I want background music, I have to manually select it in the "Create Disc" workspace.
In my Windows XP system, the audio folder was located someplace similar to this: C:\Documents and Settings\xerox\My Documents\CyberLink\Custom Menus\3.0\Menu_000\Audio
Gateway DX4380, AMD A8-5500 Quad Core 3.2GHz with ATI Radeon HD 7560D; 16GB RAM; 1 TB SATA 7200 RPM; Windows 8 Pro 64-bit; PDR11, PDVD12.