Contributed By: Mahmood Dhalla [MSFT]
The algorithm on how we throttle the downloads to give way to other applications is a patent pending, so unfortunately I can not discuss it in much detail. However I can say that we avoid the buffering problem you mention by using chunk downloads. There is a lot of work we have in this area, and your best bet would be to use BITS in your application.

If you would like to just try out BITS without having to write any code, look in your Windows XP CD, under the 'Support\TOOLS' directory, you will find the 'SUPPORT.CAP' file. This cab file contains a command line tool for BITS called 'BITSADMIN.EXE'. You can use this command line tool to exercise most of the BITS API through the command line. You can create a download request, start, pause etc. To see all the commands that bitsadmin.exe accepts, just use the '/?' command.

There is a lot more information in our SDK as well.