Hi James,
That’s a curious issue. I’ve checked with a colleague and we’ve seen functions accept up to 6mb files. That said, I think you might be more likely running into the function runtime limit of 10 seconds. Could you perhaps get the request-id of a request that failed as you described?
You can view here: [Support Guide] Netlify Support asked for the 'x-nf-request-id' header? What is it and how do I find it? in case you need some guidance on how to get that information.