I'm sorry to hear about your sites issues but I can assure you that Subscribe2 does work, although clearly it doesn't for you.
Don't forget that Subscribe2 is PHP code so it is interpreted not compiled. That means the code is translated into machine code every time it is run and because of this there are limitations imposed in it's configuration files about the allowed RAM and time for each script (especially on shared hosting setups).
If you are asking some code to process thousands of posts and generate an email from it then any PHP based solution (or any interpreted solution) is really not a good idea.
Also, do you really want to send an email informing your readers about 1000s of posts on your site every day? That seems a determined way to drive subscribers away in a deluge of information.