The process is running and is waiting for a response from the server - transactional replication
The Query Timeout message you are seeing is your Distribution Agent timing out, not your Log Reader Agent.  You need to increase your Distribution Agent profile Query Timeout parameter value to alleviate the error.  Please see the section To view and edit the parameters associated with a profile in Work with Replication Agent Profiles to edit the QueryTimeout parameter value for your Distribution Agent.

Note that if you run your Distribution Agent continuously that you will need to restart your Distribution Agent for the profile change to take affect.