Copy folder using Copy-Item - different behaviour

It is a known bug ( feature some would say):

http://groups.google.com/group/microsoft.public.windows.powershell/msg/3327f2d1544e7fb6?as_umsgid=6CAEDDC7-0F1A-4B21-8FB0-E6102A16EB51@microsoft.com

This behaviour IMO, is an artifiact of the provider and object pipeline model that powershell uses. You have to get used to the idea that the navigational context is a bit weird compared to other shells; it's explicit as opposed to implicit, since the filesystem is one of many contexts that can be used. This brings with it some weird behaviours since the targets of any given path are handled with a combination of powershell's generic grammar and the command itself, as opposed to being entirely handled by the command in shells like command.com/cmd.exe.