As far as the PED software - even though it may have the larger hoop size listed in the software - and you can put the design on the memory card - if the machine only takes up to a 5x7 design then it will beep at you if you have a larger hoop size design on the card and it will not read the card. I have the Innovis 1000 and learned the hard way on that. Also, try reducing the tension for the thread breaks.
Is your design more than 12000 stitches? Also try using 2 layers of stabilizer. Put the first in the hoop as normal. Attach the hoop, then 'float' the second under the hoop. Sometimes the density of the design adds to the stress.