I have the very same problem on my automatic build host:

make all TARGET=mess
mkdir.exe -p obj/windows
mkdir.exe -p obj/windows/tools
Compiling src/osd/windows/vconv.c...
cc1.exe: internal compiler error: Illegal instruction
Please submit a full bug report,
with preprocessed source if appropriate.
See <http://gcc.gnu.org/bugs.html> for instructions.
make: *** [obj/windows/osd/windows/vconv.o] Error 1

It's an old AMD Athlon XP based machine with WinXP SP3