Ubuntu 7.10 reached EOL in April of 2009.
Please see this document for currently supported Ubuntu releases:
https://wiki.ubuntu.com/Releases
Since you know the bug is fixed in Ubuntu 8.04, I am closing it as
invalid. Please continue to report bugs you find.
** Changed in: sshfs-fuse (Ubuntu)
Status: New => Invalid
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sshfs fails copying big files: 'Cannot allocate memory'
https://bugs.launchpad.net/bugs/231395
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