Activity Monitor indicating SDCopy isn't responding isn't unusual, since it's faceless and doesn't run its main loop very often, especially while copying.
I'd suggest opening Terminal during the copy and running:
Code:
sudo lsof | grep SDCopy
That'll indicate what we're copying at any given time, so you can see what's going on.
The system being unresponsive, though, is likely due to some low-level issue such as a kernel extension or I/O subsystem having serious issues... is your external drive the only thing on the FireWire bus (if FireWire)?