Out of the box, the delay activity does not work for SharePoint workflows. The delay will be called, but the workflow will never return to process anything after the delay.
Microsoft is aware of this problem and have already released an update to resolve this issue:
Even after the update and reboot, the delay activity will still not run as desired if you want it to run in increments of less than 10 minutes. El Blanco
has found a way around this issue by running the following commands:
Use this command to view the current property of the workflow job:
To set the new interval, use the following command:
stsadm -o setproperty -propertyname "job-workflow" -propertyvalue "every 5 minutes between 0 and 59" -url http://localhost
Hopefully this gets your workflow to actually work.