When a folder is added to the sidebar, its contents are recursively enumerated in the background - it's done this way, rather than when sub-folders are expanded (as happens in finder and explorer, for example), so that a list of files can be generated for Goto Anything to consider.
Scanning folders recursively, and not including the same file twice, nor getting stuck in a loop, is a surprisingly tricky thing to do in the face of hard links and symlinks, and cross platform vagaries. The general strategy used is to build a dictionary of directory fingerprints, and not scan a directory if we've already seen its fingerprint before.
On platforms where inode ids are available (Linux and OS X), the inode/device id pair is used as a fingerprint for the directory. On windows (or on a posix system when accessing an inode-less file system), the hash of the contents of the directory (file names, sizes, and write times) is used is the fingerprint.
If the .snapshots directory either has no inodes, or returns the same inodes as regular files in your home directory (possible if there's some form of copy on write happening), then I would expect to see the "has been seen before" message, due to the contents matching other directories. From memory, home directories at Google are NFS mounted from NetApp filers, so I wouldn't be surprised to see strange things happening with the inodes.
High memory usage and improper shutdown (pre-2070) indicates that the scanning was still happening in the background. In turn, this implies that either it was stuck in an infinite loop, or there were just a huge amount of files included, and it was just taking that much time+memory to scan them all. Either are a possibility, but I'm not currently aware of any situations that will cause the folder scanning to get stuck in an infinite loop.