I can upload large (several MB) attachments ok ($g_file_upload_method=DISK, and I can see the files appear in the storage directory), but attempts to download them result in Server Error 500.

Turns out that the problem is with readfile() php function in file_download.php. The note "TimB 11-Feb-2008 10:23" at http://us.php.net/readfile provides the solution: "To anyone that's had problems with Readfile() reading large files into memory the problem is not Readfile() itself, it's because you have output buffering on. Just turn off output buffering immediately before the call to Readfile(). Use something like ob_end_flush()."

My phpinfo() shows that output_buffering is "no value" (probably the default). I added ob_end_flush() in file_download.php in the "flush output buffer to protect download" section, and it fixed the problem for me.