Found an interesting page on OS 9. One of the suggestions for your problem involves having the Iomega Driver installed:
QUOTE
Iomega Driver problems
A greater number of hang ups while in the middle of copying a file in the Finder seems to occur when this extension is installed and you can't shutdown your computer because the Finder complains it is busy copying the file when clearly it isn't doing anything. Transferring files over the network between an OS9 G3 and OSX G4 Macintosh computer can cause the same problem while copying files from one machine to the next and it is usually the case when the Iomega driver has been loaded up on one or both machines. It seems to be common with version 6.x of the driver using either the extension or the Guest tool.
## UPDATE ##
The "hanging in the middle of copying a file" problem (actually it occurs at the very beginning or end of the file copied (observable after forcing a quit of the Finder and using the Get Info on the file remnant) is worse when SimpleText 1.4 is left idle in the background and you perform a copying of a file in the Finder.
Another idea is to rebuild the desktop: (this from a MicroSoft page)
QUOTE
Before you rebuild your desktop, use the Extensions Manager to save a record of the extensions that are currently turned on. To do this, first open Extensions Manager in Control Panels. Click the Sets short-cut menu, and then click Save Set. When the Save Set dialog box opens, type a name for your currently selected extensions (for example, "My Extensions"). When you close the dialog box, the name of your set is added to the Sets menu.
Turn off all extensions. Click the Sets short-cut menu again, and then click All Off.
Restart your computer while holding down COMMAND+OPTION.
When you see the Are you sure you want to rebuild the desktop file on the disk Disk Name? dialog box, release the COMMAND+OPTION keys, and then click OK.
When the desktop is rebuilt, click the Apple menu, and then click Control Panels.
Open Extensions Manager.
Turn on your extensions by clicking the Sets shortcut menu and clicking the name that you gave your set of extensions in step 1 (for example, "My Extensions").
Restart your computer.
Suggest you read through this page for other ideas on how to deal with OS 9, especially look for the section titled "What can I do to fix the OS9 problems?"
http://www.sunrisepage.com/computers/macclassic/macos9.htmGiving the Finder extra memory might do the trick and that is described on that page.
My memory of 9 is fading fast.... wish I could give myself extra memory.