Just been googling for other reports on this and have found a workaround that 
is good for me:
Remove the USB 2.0 support provided by ehci_hcd:

[EMAIL PROTECTED]:~# rmmod ehci_hcd

Then the copy works (but takes a long time, because USB is now 1.1).

Hope this helps others to track down the problem: I do not want to have
to use USB 1.1 if I can help it.

-- 
usb flash memory hangs after copying few MB
https://bugs.launchpad.net/bugs/17881
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