ArrayFlatten works faster if you can reshape the entire data at once:

In[39]:= testData = RandomInteger[{0, 100}, {176851, 4}];

In[45]:= AbsoluteTiming[
  res = ArrayReshape[testData, {First@Dimensions@testData, 2, 2}]][[1]]

Out[45]= 0.004762

In[46]:= AbsoluteTiming[
  respart = {#[[1 ;; 2]], #[[3 ;; 4]]} & /@ testData][[1]]

Out[46]= 0.094411

In[47]:= res == respart

Out[47]= True

If you must perform the reshape inside an inner loop, then the overhead of arguments checking, etc. has to become a burden---as you found out.