I am getting this error when trying to copy a file from CDROM to my C: drive on a Vista Ultimate machine. I did some checking and see where others have encountered this error. Some suggested using xcopy and that eventually errored out also.
Although the verbage is not identical, this Microsoft KB doc appears to be addressing the issue. I obtained a copy of the hotfix. Also, this fix is supposed to be included in Vista SP1.
Here is a copy of the hotfix for Vista 32-bit.
After installing the hotfix and rebooting I was able to successfully copy the file.