1. Yes, it happens every time
2. No, it's only the first 7 items in the backtrace
3. 17 K
4. it works with a 13 K file
5. Red Hat Enterprise Linux 3
6. OpenSSH_3.6.1p2, SSH protocols 1.5/2.0, OpenSSL 0x0090701f
7. I haven't had time to test
8. Fedora Core 4, Ruby 1.8.3

I think it uses only a chunk of data when getting the file with
get_file
I tried fetching smaller chunks and it works:

sftp.open_handle(remoteFilePath) do |handle|
    data = sftp.read(handle, :chunk_size => 4096)
end

This saved my deadline :-)