If I run a background process that takes 100% CPU under Windows XP SP2, workrave simply stops counting time.  No popups happen.  If I click the taskbar icon to get the little status window, it counts for about five seconds and then stops completely.  Sometimes the bars move a bit or the time resets, but no break reminders ever pop up.  This is bad.  

I'm using a P4 with hyperthreading enabled.  You could reproduce high CPU load with, for instance, SuperPI: http://files.extremeoverclocking.com/file.php?f=36 

Perhaps you are measuring CPU time and not wallclock time, or comparing times with == where you should have a >= ?

Sorry; this was a fundamental misunderstanding of the 'Suspend timer when inactive' preference.  Workrave keeps time fine under load, as long as you keep moving the mouse.  :)