According to this page:
http://mail.gnu.org/archive/html/info-cvs/2002-12/msg00015.html, there is a bug or incompatibility in the cvs 1.11.2 server (which ships by default on Redhat 8) that causes this problem. It is related to compression. Apparently, if I disable compression, it should work. So, again on the production computer.
cd
rm -rf myservicename
cvs co myservicename
cd myservicename
rm readme.txt
cvs -z0 update readme.txt
However, I get the same problem as before. It freezes after showing U readme.txt
