Me and my daughter just progressed to Lower City and had this same problem: my game started with some of the characters sliding around, but on her screen people were just standing with their hands to the sides and even the UI failed to load completely. When I (the host) tried to engage in a conversation with an NPC, the game became unresponsive. On a second try, I attempted to return to the upper city, but the loading screen just never went away.
