I am able to reproduce the issue, and I note that it works if I attempt to bulk load the file from another SQL Server instance.

But what are you trying to achieve? It appears that you want to load the entire contents of a file into a table. In that case, wouldn't it be easier to do:

SELECT list_to_table(convert(varchar(MAX), file_stream), char(10))

FROM yourfiletable

Where list_to_table is a function that cracks a string into rows. See this article on my web site a for a heap of such functions: http://www.sommarskog.se/arrays-in-sql-2005.html.