Your server may not have enough resources to process the import (e.g. you reached your memory_limit or one of PHP's timeouts). Thus the "internal server error" message.

In any case, consider posting here as well www.joomlaworks.net/forum/k2-en/16491-tool-for-importing-exporting-items-to-from-k2 as it's the extension author's original post and he may be able to assist further.