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I'm still undecided on if this is a bug or not. The problem occurs even 
when I'm not reading "data from a file of an unknown size." My example 
causes a MemoryError on my machine even though the file I'm reading 
contains 0 bytes.
The problem is Python's implementation is "alloc the requested bytes and 
truncate if needed" vs what I expected "read chunks at a time up to the 
requested number of bytes." There's nothing in the documentation which 
states the implementation, although "Note that this method may call the 
underlying C function fread more than once in an effort to acquire as 
close to size bytes as possible." leans slightly towards my 
interpretation.
I looked a little for real-world cases that could cause a denial-of-
service attack but didn't find one.
If there is a problem, it will occur very rarely. Go ahead an mark it 
as "will not fix" or something similar. I don't think the change in the 
code is justifiable.