I just got the 'could not read chunk size' error AND FOUND A SOLUTION -- at least for one scenario.
First, my configuration...
SERVER: CollabNet Subversion Edge Server 2.0.0-2190.74 (Subversion binaries 1.6.17-2190.74) running on Windows Server 2003 32-bit.
CLIENT: TortoiseSVN 1.6.16, Build 21511 - 32-Bit (Subversion 1.6.17) running on Windows XP Pro 32-bit with SP3.
Steps to reproduce...
I got this error after right-click-dragging a versioned subfolder into another versioned subfolder within my local working copy folder and then choosing 'SVN Copy versioned item(s) here' (this is a TortoiseSVN context menu command in Windows Explorer when right-dragging folders). The subfolder contained one ANSI-encoded text file, MANIFEST.MF, which I believe I did not modify (my Subversion configuration does not include a mime type for .MF files). I subsequently committed the newly copied subfolder. Later, anytime I tried to update my Subversion local working copy folders on this PC, I got the chunk size error.
Work-around...
I resolved this by restarting my Subversion/Apache service (which in and of itself did not help and may not have been necessary), then deleting the newly added subfolder from my local working copy folder (it had already made it to the repo, so I wasn't going to lose anything), and THEN performing an Update, which succeeded without the chunk size error and re-fetched the subfolder I just deleted.
In my case, I had copied TWO versioned subfolders this way, and I could not successfully update the root of my local working copy folder until I had deleted BOTH of these new subfolders.
Follow-up...
I assume this is a bug in Subversion server and/or TortoiseSVN client, but I do not have the debugging skills to make that determination. I'll report my findings in the TortoiseSVN Issue Tracker and see where that goes.