- 1 min after each 200th iteration/item created

a batch of 200 items may still be too big for your environment....

there is not any exact number which would work in general, you have to tune (lower) it until you find a suitable number/size.

- the first pause sometimes (50% of time) taking as long as 20 min instead of 1 min

setting pause for 1min doesn't mean workflow will sleep for 1min and then immediately run.

despite you make it pause for 1min, it will pause for at least a time period until next timer job wake up. typical/default timer job wake up frequency is 5min. so waiting/pausing for 5min is very normal.

after that, workflow is put on something like 'run queue'. now it depends on how your environment is (over)loaded - it may get executed immediately or it may wait on queue until it get its turn. if you say it waits for some 20mins it seems your env is overloaded or not configured properly to handle all the tasks/jobs generated

- the first pause at the 200th iteration almost consistently (80% of time) taking about 10-15 min and the workflow consistently failing after that pause is complete with nothing more than "An error occurred in..."

waiting for 10-15mins may again signalize performance bottleneck.

failing workflow may be consequence of both performance issues or too big batch size.

I have a site workflow that queries 2 lists and then is supposed to create about 5k items in a 3rd list

I'm affraid workflow is not a proper approach for these kind of tasks.

creating 5k items with a workflow will take  quite a bunch of time.

at second it will generate serious load on an SP env, which you very likely already experience.