I had the same issue for the past day (CS5 PSD & Encore). Continually crashing halfway through import as Menu in HD/Blueray mode. I tried everything. Import as menu every which way, dragging the file into Encore, reducing the size of my PSD file, renaming, moving files around, restarting, etc. etc.
FINALLY, what ended up working, was to remove all the menu “programming” (which I had inserted into my PSD file, per Adobe help instructions). So no (#) Page, no (<+) Button, no … You get the point. Then Encore imported as menu. Hope this helps someone (2 years after your original post)!
If you found another work-around, please let us know.