Yes it is possible to scan all 128 addresses for finding slaves - it just takes a lot of time! But do you expect all your slaves to be addressed from 1 to 128? Normally there's blocks of addresses that certain devices live at, so you could only scan a limited range of addresses to speed things up.

The master as such does not go into an 'unknown state' - it is most likely waiting for the ack from the slave - obviously your i2c code should have a timeout when it is waiting for an ack. Ten seconds seems an excessive amount of time to wait - 100mS might be more reasonable. As to why the other i2c devices stop working - maybe your code doesn't recover the bus state as it should. I think you need to look carefully at your code to see where it stops and how you recover.