I am seeing the exact same behavior (ArcMap Table of Contents flashing when the group policy update runs and then ArcMap freezes for some users). The problem began when our organization upgraded to Windows 10 several months ago, and it has persisted since then. We were using ArcMap 10.3.1 when we started seeing the problem, and we have updated to 10.4.1 in the meantime, but the problem persists. The odd part is that everyone sees the flashing TOC when the group policy update runs, but ArcMap only freezes for a handful of users (3 or 4 out of 100), and I cannot figure out what is different about their setup. I have tried deleting their ESRI user folder and registry settings, creating a new windows profile, and even giving them a new computer, and they continue to experience the freezing behavior. The users experiencing the freezing have also changed over time. A few users were getting 5-6 freezes a day for weeks, and then it suddenly stopped and has worked fine ever since. They have made no obvious changes to their computer or workflow that I can tell.
I have opened two separate support tickets with Esri, and they acknowledge that something in the group policy update is causing the flashing/freezing (although they hadn't narrowed it down to the WM_SettingChange message). They did reference the "enhancement request" (actually a bug) #ENH-000103524 mentioned above. The biggest problem is that they cannot reproduce the freezing behavior on their end (although they do see the flashing), so they keep telling me that it must be a problem with our group policy/Active Directory setup. Just like Robert's situation, no one in our local office can change our group policy settings. I have contacted our corporate IT office, and they have told me that they will not change the group policy settings, so we must solve the problem with our vendor (Esri).
While this may be a problem with our group policy/Active Directory or even Windows itself, it seems that it only affects ArcMap; all our other applications continue to run normally after group policy updates. In addition, ours is not the only organization seeing this problem, so it is not unique to our setup. As such, I feel like Esri should be taking a more proactive role in fixing the problem or encouraging Microsoft to do it. This problem is driving me crazy; it has caused many hours of lost productivity, and I am desperate to get it fixed.