I had to use bundle sparse to solve this problem. The data transfer rate is ten times faster, too. Amazing! So I guess the regular sparse image is limited to 4.29G? cuz I can't drag any file bigger than that to a sparse image, and anything added after the image is already at 4.29G will become corrupted.
BTW, when creating the bundle sparse image, do the partition options matter? Do they affect the data transfer rate?