As other people have already mentioned in other forums, Windows XP does not play good with large files (above ~3GB or so). To date, I have not been able to copy any file larger than a few gigabytes to my backup machine, getting "Path too deep" error that others have complained about. This happens whether I'm copying the file across the network or from a USB hard drive connected directly to the WHS box. I have tried copying using simple copy-and-paste in Windows Explorer as well as using Microsoft SyncToy. The Windows Explorer method usually results in the "Path too deep" error, followed by a sluggish system that ends up forcing me to reboot; whereas the SyncToy method almost always causes a complete system crash.
Solution I came across was Long Path Tool - http://LongPathTool.com