Well, I played around a bit without changing the build (I'm using r27944-100830). Here's what I've seen:
If we are on the WPS and press the hotkey (previously set to PictureFlow), it opens the PictureFlow and everything seems OK.
When I press the Play key to go back to the WPS, it shows the theme skin base, but without any menu content or title (the viewport area is empty). However, things like the volume, battery, shuffle and repeat indicators are shown, however they are stuck (e.g. volume doesn't update). The disk activity indicator is shown, and never disappears - however, I don't hear the sound that my iPod makes when it is reading the disk, so I don't think there's any activity. I don't see anything related to "undefined instruction". Things show up this way at least with the photoSkins-Orange theme I've ported to iPod nano, but the issue is common to other themes too.
Then I reset the iPod using the key combination (Menu+Select).
If we are on the WPS, and go to the PictureFlow, and exit out of it by selecting another track, exactly the same thing I described above happens. Still no "undefined instruction".
I reset the iPod again...
Now, when I opened PictureFlow from the hotkey, for some reason it started preparing the album artwork... but it gets stuck with the progress bar only filled by 4 pixels. Here I go resetting it again...

This time, PictureFlow did reload the artwork, but didn't get stuck at that step. But now, no artwork appears on the albums: they are all here, but all have the empty slide image (with the "?"). When I select on track, the WPS doesn't appear (it doesn't exit out of PictureFlow by selecting a track). Then, to break free of the PictureFlow, I press Menu and select "Go to WPS". It hangs again with no menu or WPS displayed like I described first. Let's reboot again, for the last time

Since this is the only Rockbox-capable DAP I have, I don't want to break it, and then rest the iPod one last time, connect the USB and install the latest build (r27963). Then I "reboot" with ROLO.
PictureFlow opens from the WPS, without album art. I tell it to rebuild the cache, then quit the PictureFlow using its menu and selecting "Quit". Then I open PictureFlow again from the WPS. It prepares the album artwork... and now the slides have the artwork (it should have been a momentary bug). However, I still can't select a track from the PictureFlow, and when I press Play to go back to the WPS, it hangs again like I described on the first paragraph.
Well, I'm gonna remove PictureFlow form the hotkey until this is fixed, to avoid having to reboot the iPod again...