When you download multiple files at once, WHS will offer you the option of creating either a .zip or .exe (self-extracting .zip) file. You have to choose one or the other. The system partition is used as a cache for this file. In your case, the system partition probably won't have enough space for everything. And you may find that the process of creating the archive for downloading results in your download timing out, as well, since that's quite a bit of data to compress. And finally, the component being used to compress the file may be unable to handle an archive of that size.
When you upload a file, it's also cached on the C: partition until the upload is complete. If your C: partition is almost full, you could run out of space due to that as well. In addition, I believe files being uploaded are limited in size to 4 GB.
I'm not on the WHS team, I just post a lot. :)
