During a checkout of a Subversion tree on my Windows 7 installation I got quite a fair share of errors from TortoiseSVN, all of which ended with
The file or directory is corrupted and unreadable.
After digging around a bit, I came across this blog post on the exact same problem. And subsequently I found there is a hotfix available from Microsoft on their page about . This hotfix will be in the upcoming service pack 1.
You might also be able to work around it by disabling indexing on the particular folder or drive. It solved it for me at least.