pngout is not included by default because it is a closed-source tool, and the author of pngout would not permit it to be bundled with the plugin.
The plugin only displays the ‘nag’ message when you’ve enabled pngout but haven’t yet installed it.
The file is actually a few mb, because it includes 5 or 6 statically compiled binaries for different CPU architectures. It should not take 10 minutes ever though. You might want to see if you can increase the max_execution_time in php.
Unless you have full control of your server, and can adjust timeouts and such, I would not use the jpg to png function unless it is a graphic that you are pretty sure will be smaller as a png. Photographs will never be smaller as png files, and attempting to convert them to png will take forever. You’ll generally just get a blank screen like you’re seeing when it times out.
If you’re getting timeouts the other direction too, you need to decrease the png optimization levels. Pngout takes longer than optipng, and using them in combination will obviously take even longer. Just to give you some sort of guideline, a 400kb PNG will easily take over 30 seconds to optimize (which is the default php timeout). It does vary between png files. I’ve seen larger ones take less time, and smaller ones take more, but generally, the optimization time increases exponentially with file size. For example, if a 200kb takes 15 seconds on your server, a 400kb could take a minute, and an 800kb could take 3-4 minutes. Hope that helps make sense of things a bit.