Mike,
Low voltage is a possibility. The memory diagnostic turns on the instruction cache and runs the diagnostic with lower power consumption than normal. What kinda supply are you using? What's the voltage reading when Linux application is running?

The 16meg memory space is repeated 4 times in the 64 meg space; I'm struggling to come up with a situation where program would run in 16 meg but not 64 meg.

Have you updated the CPLD? The new CPLD equations improves the CF interface significantly.

I would like to try your software on my 64meg setup and see if I encountered the same problem.
Bill

PS, exciting work you are doing!