The reason why this fails is because you have escape sequences wrapped in double quotes. If you try the same thing with single quotes, then you will notice this function is working properly. Escape sequences are parsed in the context of double quotes.

Yes, this bug occurs when the filename contains a real windows newline in the filename. so, if using single quotes, the result is file not found. The bug in my case occurs when unpacking files from a .zip file that has a windows newline in the filename.

This is not a bug. See below:

Test script:
--------------
<?php

// Create a directory to work with
mkdir("testdir", 0777);

// Create a file with Windows-style newline in the file name.
file_put_contents("testdir/filename_with\r\nNewline_character", "test 321");

// Read active directory
$files = scandir('testdir');

// print the directories/files
print_r($files);

// Store the file name of the created file
$created_file = $files[2];

// Attempt to copy file:
echo "\n";
copy("testdir/filename_with\r\nNewline_character", "testdir/copytest");
echo "\n";

// Output files in testdir
$files = scandir('testdir');
print_r($files);

// Can we find "\r\n" in the file name?
echo "\n";
$escaped_name = str_replace(array("\r\n"), '\r\n', $created_file);
echo "created/copied filename: ". $escaped_name;
echo "\n";

?>

Expected result (if bug):
-------------------------
Array
(
    [0] => .
    [1] => ..
    [2] => filename_with
Newline_character
)

Warning: copy(testdir/filename_with
Newline_character): failed to open stream: No such file or directory in /home/husman/Desktop/test/php/bug_67361.php on line 20

Array
(
    [0] => .
    [1] => ..
    [2] => copytest
    [3] => filename_with
Newline_character
)

created/copied filename: filename_with\r\nNewline_character


Actual result:
-------------------------
Array
(
    [0] => .
    [1] => ..
    [2] => filename_with
Newline_character
)

Array
(
    [0] => .
    [1] => ..
    [2] => copytest
    [3] => filename_with
Newline_character
)

created/copied filename: filename_with\r\nNewline_character


Further Comments:
-----------------
Maybe the file name is not being properly encoded when unpacked from the zip file?

Typo in "Expected results (if bug)" in the previous post. It should be:

Expected result (if bug):
-------------------------
Array
(
    [0] => .
    [1] => ..
    [2] => filename_with
Newline_character
)

Warning: copy(testdir/filename_with
Newline_character): failed to open stream: No such file or directory in /home/husman/Desktop/test/php/bug_67361.php on line 20

Array
(
    [0] => .
    [1] => ..
    [2] => filename_with
Newline_character
)

created/copied filename: filename_with\r\nNewline_character

[not a bug]

You are completely right, seems like it was the zip extraction that converted the windows newlines to a unix newline, and therefore the filename was changed before the copy command ran with the original name. I feel embarrassed now, sorry to have been yet another not too good tested bug report. I will file the bug to the zip extractors instead.

Not a bug, see comments above.