Actually it's not just the hardware limit that is 4GB (and that is only on fat32, not NTFS) but the limit in avi type 1 is 4GB but also 2GB. Weird and incomprehensible, but then again Microsoft wrote the standard. ;)
Well, I'm just speculating that a limit means that there is an actual limit... but can't actually back that up with facts offhand. Especially as the limit seems to be 4GB in actuality but due to the software it is 2. No, that doesn't make any sense to me either, but that's what it says if you...
And again, limited in size should mean you can't make a file bigger than 2GB with that specification, so if you have 2.7GB it stands to reason it can't be a type 1.
Besides, a 2GB limit is an actual 2GB limit. If you have that, you can't write anything larger than that. Thus, if you have a 2.7 GB file, you have no 2GB limit. Fat32 tops out at 4GB files, I believe. I've run afoul of that with DVD image files on occasion, when I still used fat32 anywhere...