To answer your question, The MAX_PATH limitation of 256 characters could be _relative_ to the current directory so that if you change your working directory to a directory 10 levels deep, then you have another 256 characters to specify even deeper files... but if you're at the top trying to copy the entire structure, you may run out of characters.
Apparently Microsoft has allowed for very long paths with the "\?\C:\verylongpath" construct although I've never tried using it. Microsoft has their "Robocopy" application to copy files with deep pathnames. (Found in the Resource Kit )
Microsoft's explanation is in the following article:
"Naming Files, Paths, and Namespaces"
< http://msdn.microsoft.com/en-us/library/aa365247(VS.85).aspx#maxpath >
I've given up second-guessing Microsoft.
HTH,
JW