thanks for the reply.
I am using FastCGI on IIS7 and have already increased the timeouts by an order of magnitude as follows:
(reset IIS after these changes)
site1 processes fine (except for getting a 500 error on trying to access generator/index.php on site2 after the processing on site1 has finished).
The differences are that site2 has about 3x the pages as site1 (~5,000 vs ~1,650). One other thing that I did not mention is that site2 uses the same url rewriting method as site1 but the rewritten urls do not have any file extensions. However, I have tried adding a static index.htm page to the root folder of site2 and even that is not indexed.
[external links are visible to admins only] and [external links are visible to admins only] are examples of pages not indexed.
For testing I have allowed full access to the windows "Everyone" user to the ror.xml, stemap.xml, the generator folder and all subfolders and files.