Update: September 2000 - Palm has acknowledged a problem with cradles connected to certain systems using ACPI. See their KnowledgeBase article here for more details.
The cradle problem was first noted, and widely quoted on comp.sys.palmtops.pilot, by Justin R. Cutler. The following paraphrases his findings.
May 2000 - Some users who recently purchased a Palm IIIe, IIIxe, or IIIc may have found that their Win 9x computer will stall or crash whenever the cradle is plugged in. This is typically a result of msgsrv32.exe hanging the system.
Justin R. Cutler has determined that the root cause of the problem is improper wiring of certain new cradles (usually the black ones with the Palm logo). According to Palm, the cradle wiring diagram should look like this
On the those cradles that are faulty, pins 4 (DTR) and 9(RI) are shorted. You can easily confirm this with an Ohm meter. The RS-232 definitions of those pins are:
For those impacted by this problem, it is recommended that you contact Palm for a replacement cradle. The contact phone numbers follow.