I am no longer experiencing the crash after removing all materials from my scene in 3DS Max but now the editor is hanging on the Building static mesh 100% step. I waited quite a long time and the editor appears to be completely locked up. I will try degrading the polygons further but I am still unable to import the mesh.
I also tried not merging the meshes and it never seems to even build the first mesh (even though its a rather small one, few thousand polys).