Hi dilinx,
(I) Yes, technically the slave is allowed to do this. Again from spec
(II) Please read the spec of AMBA AHB - Here is a snipet
"When a transfer occurs the slave can decide to issue a SPLIT response if it believes the
transfer will take a large number of cycles to perform. This signals to the arbiter that the
master which is attempting the transfer should not be granted access to the bus until the
slave indicates it is ready to complete the transfer. Therefore the arbiter is responsible
for observing the response signals and internally masking any requests from masters
which have been SPLIT."
In other words Master is "Held" in that state by the arbiter , because HSPLITx is sent to the arbiter not to the master. So the scenario you are thinking cannot exist.