There must be something badly amiss in the textbackground processing.
Below a small example demonstrating the problem.

When a block falls badly on a page boundary an error occurs as shown.  
One may have to tweak the \blank[] in order to get the error  
depending on local font settings etc.

In my case 0.78 shoved the second block to page 2 without an error  
but from 0.79 onwards the error occurs. At 0.66 the block is split  
after the third line, but at 0.68 again the error shows.

TeX complains as follows.

! Argument of \dodoubletestempty has an extra }.
<inserted text>
                 \par
<to be read again>
                    }
\doifnextcharelse ...token =#1\def \!!stringa {#2}
                                                   \def \!!stringb  
{#3}\futur...

\doMPpositiongraphic ...ta {#1:}\setupMPvariables
                                                   [self=pbg:1,  
mp=mpos:par:c...

\dodoublegroupempty #1->\def \dodogetargument ##
                                                 1{\def  
\dodogetargument {\do...

\dohandleMPpositiongraphicrange ...ositiongraphic
                                                   {#3}{#4}\fi \fi
...
l.29 third line

?
Process aborted


======================================================================== 
===
% metapost based variable backgrounds
\setupcolors[state=start]
\definetextbackground[code][frame=off,location=paragraph,
     	backgroundcolor=cyan,color=red,backgroundoffset=0pt]

\definetyping[TEST]
\setuptyping[TEST][option=JV,
	before={\bgroup\setupinterlinespace[line=3ex]%
		\testpage[1]\starttextbackground[code]},
	after={\stoptextbackground\egroup}]

\setupbodyfont[14pt]

\starttext

Testing textbackground\crlf

\startTEST
first line
second line
third line
fourth line
fifth line
\stopTEST

\blank[0.73\textheight]

\startTEST
first line
second line
third line
fourth line
fifth line
\stopTEST

\stoptext


Hans van der Meer