If the php function of readfile is disabled, then your downloads will not work properly.
You can do one of 2 things:
1) turn on downloads by streaming
2) or add this code to includes/modules/pages/download/header_php.php
Around line 224 of that file you should see this:
if (DOWNLOAD_IN_CHUNKS != 'true') {
Change it to this:
$disabled_funcs = @ini_get("disable_functions");
if (DOWNLOAD_IN_CHUNKS != 'true' && !strstr($disabled_funcs,'readfile')) {
