I have had a really hard time trying to find information regarding I/O performance in .NET. All I wanted to know was the optimal buffer size for a FileStream on an ordinary single disk machine, but I couldn't even find that. As it happens, to day I stumbled across a paper by Microsoft Research which talks about I/O performance with .NET v2 (beta 1) and answers a few important questions. It is not long, so I would advise everybody to have a read through it; but for those that are really really lazy here is the summary (quoted from the paper itself)

(1) For single disks, use the defaults of the .NET framework – they deliver excellent performance for sequential file
access.
(2) Pre-allocate large sequential files (using the SetLength() method) when the file is created. This typically
improves speed by about 13% when compared to a fragmented file.
(3) At least for now, disk arrays require un-buffered IO to achieve the highest performance. Buffered IO can be 8x
slower than un-buffered IO. We expect this problem will be addressed in later releases of the .NET framework.
(4) If you do your own buffering, use large request sizes (64KB is a good place to start).
(5) Using the .NET framework, a single processor can read and write a disk array at over 800 MBps using unbuffered
IO.

Another interesting fact (which contradicts the first point a bit as the default is an 8K buffer, but makes sense if you read the whole paper) is that a 64K buffer appears to be the answer to my question at the begining of the post.