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I've created a views slideshow on Drupal 7.9, Views Slideshow 7.x-3.0, jquery.cycle.all.js v2.999. Works fine in Chrome, Safari, Firefox and IE9, but on IE8 on Win XP the browser crashes immediately on loading the page (sometimes, part of the page is rendered before the browser freezes). The slideshow works in IE8 in Compatibility mode.
Try jquery.cycle.lite.js instead but prev/next don't work, IE8 still crashes.
Drupal 7 ships with jquery 1.4.4, try jquery_update to jquery 1.5.2 - crash