But let's say you launch a shell with a command to.. let's say 'find' everything on your C drive and dump it into a text file.

Anything, just something that takes a long time would do.

If this shell is launched by way of a stystem() call from a GUI, will the GUI hang until 'find' is done?

The system() library function uses fork(2) to create a child process
that executes the shell command specified in command using execl(3) as
follows:

execl("/bin/sh", "sh", "-c", command, (char *) 0);

system() returns after the command has been completed.