Hey Jie,
You are correct I am working with Landsat 7 data and I believe the tool to be truly hanging up. I let the script run in the background for over an hour, but nothing ever happened (after the first minute or so the file size never changed). Also, after encountering this problem I ran just the compositebands function from the ArcMap command line and it too hung up. The progress bar quickly progressed to about 75% then stopped, it too ran in the background for about an hour.
I don't believe the input images to be corrupt, I have loaded them in ArcMap without error. However, every time I am working with a new set of images (my script extracts the bands I am interested in from a tar file to a temp folder, which will be deleted after the composite image is created).
All is not lost, however, I decided to try creating an Imagine format image rather than a TIFF. The script completed successfully very quickly and the output composite .img file opens successfully in ArcMap and Imagine and contains the spatial reference and pyramid layers as well.
Output format isn't terribly important to me so I am declaring success.
Thank you again for your help and your quick responses.
p.s. I don't have the link to the original landsat images, I got them from a local server and am only using them to put this script together.