When rebuilding files over 100 megs (up to sevarl gigs) from 2000i to V8, it errors out reporting there is no disk space available.

The source and destination drive are the same, and have over 100 gigs free.

I tried making the destination drive to another drive, smaller (30 gigs) and it worked.

Any ideas on why this would occur?

The only thing I can think of would be an incorrect return from a GetDiskSpace API call.
You might contact Pervasive and at least let them know about the error.