Display driver stopped responding and has recovered
The problem is with the Intel driver on Windows 7. It seems to be unable to handle a special condition, and FileZilla is in the unfortunate place to trigger that fault. All reports so far didn't mention a crash, only a screwed-up display (the toolbar above the log pane is overdrawn by the scrolling log).
The crash in your case is not because you are connecting to a server, that's only coincidence. It supposedly occurs as soon as the log starts to scroll up. Others get a display bug, you a crash (as it often happens with driver faults).
The setting you changed relocates the log, into one of two alternate positions: either besides the transfer queue, or as a tab in the queue pane. Both seem to prevent the problem because the log is not next to the toolbar and thus cannot overdraw it. Disabling the log or the toolbar both may be working, also.
The ultimate solution would be to get a bug-free driver from Intel. You should get the latest one, as it may hopefully prevent at least the crash itself. Other than that, you only have the workaround to prevent the log being below the toolbar.