From: http://www.devworld.apple.com/dev/tools/mpw-tools/important.html
as reported by MacInTouch.

MPW and Mac OS 8.5

A serious bug has been discovered in the MPW Shell and ToolServer which can
cause a Macintosh running Mac OS 8.5 to experience errors and File Manager
operational failures. The bug exists in all versions prior to version 3.5d4
which was released on 9/9/98. The problem occurs when the Shell and/or
ToolServer are executing a sequence of tools (such as during a build
cycle), and the Mac OS 8.5 Finder is used to start a file and/or folder
copy operation. When both operations are occuring simultaneously, the
Finder will often start reporting File Not Open (-38) and/or Param (-50)
errors. When it does so, the MPW operation will also start experiencing
File Manager errors.

The bug has been fixed in version 3.5d4 of the Shell and ToolServer.
However, for those people who prefer to use Golden Master versions of
software, we have also released new Golden Master versions (v3.4.3) of the
Shell and ToolServer which contain the bug fix. In addition to the Mac OS
8.5 bug fix, the 3.4.3 versions also contain several other bug fixes that
improve the stability of the Shell, ToolServer and SourceServer. Note - the
additional bug fixes in v3.4.3 have previously appeared in versions 3.5d3
and 3.5d4 (i.e. Prerelease versions) of the Shell, ToolServer and
SourceServer.

If you upgrade your operating system to Mac OS 8.5, we recommend that you
also upgrade your MPW Shell, ToolServer, and/or SourceServer to version
3.4.3 (Golden Master) or to version 3.5d4 (Prerelease).