Copying a file >16MB where that amount of memory available will result in a corrupt file ?

GREED Believe that this is NOT a bug in PFS2.  It looks like it may be an AmigaDOS bug.  This is being investigated.  In the mean time use the CLI to copy such files :-

Copy From <From> To <To> Buf=32767

This command will limit the amount of memory that AmigaDOS uses to buffer the copy operation.