The inefficient sparse matrix operation in colloc_JacODE_region is optimized according to the method intruduced in Loren's blog (http://blogs.mathworks.com/loren/2007/03/01/creating-sparse-finite-element-matrices-in-matlab/). More than 10x efficiency improvement can be expected for large BVP systems.
The mex file SPARSE2.MEXW32 is compiled from SuiteSparse(http://www.cise.ufl.edu/research/sparse/SuiteSparse/). It is about 2x faster than SPARSE. If you encounters problem with it, just comment it out in bvp5c2 and use the MATLAB function sparse.