XCODE has been around a lot longer than that. It dates back to at least v6 and, I vaguely recall, maybe even v4.
I do not recall ever running into a file length limitation. But it turns out that, according to P6298, older versions of XCODE did have such a limit. So it sounds like you're using an ancient, obsolete and unsupported copy of XCOPY rather than the 10.X version. My guess is that someone has been copying their old copy of it forward for a very long time.
So, yes, upgrading would probably be a good thing.