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Like a Boss! It worked! Now, here is the funny thing - I downloaded straight from Megaupload. I came to realise that the 'request entity too large' had to do with a service book that I was deleting - BlackBerry Internet Service 2 service book. I had been deleting this service book because it kept contributing to my 'download failed' problem when I downloaded large files that didn't give me the 'request entity too large' problem. The problem is that having both 'BlackBerry Internet Service' and 'BlackBerry Service 2' service books let to a 'download failed' problem (as was the original problem). So I took to deleting 'BlackBerry Internet Service' (the one WITHOUT the 2) and last night downloaded a 700MB file from Megaupload.
Currently downloading another 700MB file and am at 81% and going strong.
interesting. Is the file re-installed on reboot, like the 'internet servive 2' file?