MATLAB version 7.3 (2006b) crashes when I try to do ...
This may relate to a known bug in MATLAB 2006b with persistent variables. The bug relates to agressive optimization of for loops introduced in MATLAB 2006b, which is incompatible with persistent variables inside the for loop. The progress indicator used in fieldtrip (i.e. the one that is dealing with the cfg.feedback options) is using a persistent variable so that it only updates the progress bar maximum ~100 times, instead of 10000 times (e.g. if you do a dipole scan for 10000 grid points).
You can determine whether this bug is actually the problem for MATLAB crashing by
starting matlab cd fieldtrip-xxx/private progress('init')
If MATLAB crashes, then this is indeed the problem. You can try the following work around.
First try typing
feature accel off
on the MATLAB command line and try reproducing the bug (see above). If that indeed solves it, I suggest that you add
if strcmp(getfield(ver('MATLAB'), 'Version'), '7.3') feature accel off end
to your startup.m file.