After much deliberation, the problem has been resolved.
It turned out to be a permissions issue on the Cold bucket storage.
The splunkd service on windows was running as local system. The Server$ computer account had read write access to the Cold bucket folders, and copying/moving/creating folders worked as expected when running as local system. For some reason this didn't work for splunk.
To resolve this, a domain service account was created and the permissions re-applied for this account. After changing the user splunkd ran as, the cold buckets started moving.
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