[dnanian]

It's possible that, if the drive filled "outside" the image, and the image didn't report an error -- or one of the internal OSX copying APIs indicated success on a retry, even though it failed -- then the written files would be damaged. But we wouldn't continue unless OSX itself told us the copy was successful.

No question, though, having insufficient space for your image to grow is unwise: as I mention in the User's Guide, all sorts of catastrophic things can happen if an image is prevented from growing (including kernel panics).