It never worked for me (started with nopCommerce 1.9) and does not work in the current version 2.2. I get the same error message: "Parameter is not valid". I use use disk storage and the error also occurs on a local machine when running under VS development server - there should not be any problem with file system permissions in such a situation. There is no entries which can be related to this error in the nopCommerce log.
A related issue: error message about failed copy operation is not obvious therefore it happened to me to edit an existing product while thinking that I am editing its copy, in fact I consider this issue with non-obvious error reporting in admin to be much more important then the inability to copy a product with its images. It would be nice if such errors were reported using some popup box, which would be impossible to be overlooked.
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