The Portal Fence is already on the desktop so, it can't just copy into itself.
This is actually not true. In Windows you CAN copy an icon from Desktop to Desktop (or, more generally, internally to any folder). Problem only occurs with copying from a Fence to another place on the Desktop (including another Fence), or from the Desktop to a Fence, or when trying internal copy inside a Fence.
But you are perfectly right in saying it does not occur when copying a file from a Fence to a folder in explorer (including Desktop folder), or from a folder to a Fence.
As a conclusion, Fences doesn't support internal copy.