After upgrading SEPM from 11.0.7 MP1 to MP3 on my Server 2008 SP2, the manager console started hanging whenever I generated a report. The problem was attributed to JDesktop and IeEmbed.exe. I lowered IE security settings and installed various versions of Java, but doing so didn't solve the problem. Further exploration revealed the SEPM comes with its own Java and that, for whatever reason, the necessary IE add-ons had not been installed. After much frustration, including two uninstalls (one with the clean wipe utility), the solution was simple. I am making this post in case anyone else runs across the same problem.
THE SOLUTION:
If you encounter this problem, open the SEP Manager Web Access from the machine on which SEPM is installed (localhost:9090), and then launch the web console, allowing any Java add-ons to install. Then click on the download and login button for the console and again, let any Java add-ons install. After doing both, your reports should open fine in the regular console.