Something else must be going on since I can't seem to reproduce this here.

I tried testing in my normal copy of mIRC 6.3 and in a clean install. In both cases I pasted and received in DCC Chat windows the full contents of the whatsnew.txt file.

I tried with various combinations of settings in the Options/IRC/Messages dialog, including changing the Multibyte settings.

Can you tell me what your font settings are for the DCC Chat windows?