Thank you for the replies... 
I have decided to built a new VM with OUT the 2012 base OS... I hate it.. 
IT has bothered me that when I run this sproc the database hangs.. I can't run any other query.. 
The sproc is large but not crazy.. does basic inserts / updates in transactions and calls a few other sprocs at the end..
There is no logical reason this would cause the locking it does... Even getting database properties is frozen while it is running.. it does not make sense. 
The whole database is just to load a file, do some basic processing and create text files to load into another server running magento (ecomm)  is is basic in my world.. 

I have a new server up, latest SQL installed on it.. I will import the database and move the SSIS code..

Come to think of it.. I am not sure how to move all of the SQL Server Agent Jobs.. I think you can script them right? I will look..
I am very curious to see what this does.. 

and to answer another question.. I have separate user account running SQL, SSIS, and Agent all within the local admin group... the server is NOT domain joined.  So it is NOT a permissions thing.. since it does run cleanly sometimes.