Ok, got a solution.
Import all records without any images, as in remove any image xml tags under “settings images”. Make sure you take note of the configuration. Make sure you select the “save as draft if no images found” option under settings before you run the import. Set the iteration import setting to import about 20 records at a time, it will be fairly fast.
NB – I also de-activated all other plugins and made sure that the “increase speed by disabling do_action calls” box is checked.
Once you have all the records imported, run import again, this time with images. Set the iteration import setting to import about 3-10 records at a time, depending on server resources and how many images each record will import. I set it at 3 as I am downloading approx 10 images for each record. Each record took about 30 seconds to import and did not slow down. In the plugin settings where is asks you about updating existing records, only select update status and images, de-select everthing else. This will now change the record from a draft to published and add the images.
Hope this helps.