I'm sorry, I don't understand what the error is. Is there an error message? And does the error happen with any image or icon, or just a specific one?
I have no issues changing the button image in a virtual machine of MX 21.2.1. For some reason the setting only shows an empty image icon, but the panel button itself shows whatever image I have selected.
To confirm if is that bug, can you add the regular Xfce applications menu to your panel and try to change its icon? It should freeze as well. Don't click on anything, just wait (a long time) and the dialog should eventually pop up.
Unfortunately, I have no idea. This is a bug in exo, not Whisker Menu, and I'm not involved with that. It is also not something I can work around, since the hang happens when I make a single function call to bring up the exo icon chooser dialog.
You could comment on the bug I linked to above and say that you are still experiencing it, so that the developers of exo know that it is still happening. They will probably have things they want you to test to help them figure out what is going on.