Thanks dfinkelstein, not a regular visitor here :)
I have some more information and the answers to your questions:
Does PGP Command Line completely hang? Or does it finish processing after some delay (say a few minutes)?
After the hang I let it run for 20 minutes. It made no further progress during those 20 minutes (despite grabbing as much CPU as it could), so that looks like a complete hang.
Does the problem occur for the root uers?
Yes the same hang occurs for root too at the same place.
I left it running for over an hour as root, but it still hung in the same place and made no further progress.
Does the problem occur if you run in local mode, with the "--local-mode" option?
Yes the same hang occurs if "--local-mode" is explicitly specified.
Does PGP Command Line complete successfully if you dump the file packets? Run "pgp --dump-packets filename" and see if it completes and reports any errors.
Yes a dump packets on the encrypted file produces output and completes successfully (exit code 0) after running for about 12 seconds.
Last 2 lines logged are:
...
New: (773 bytes) partial end
gcms_tmp.oenc:dump packets (0:packets decoded successfully)
NEW INFORMATION
I found that by changing "--output -" (i.e. send decrypted file to stdout) to "--output a_specific_file_path", PGP could decrypt the file OK.
So that is a workaround, but I'd rather be able to use "--output -" on large files too if at all possible.