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I think the reason you're not actually re-writing the file - by default I think cp will unlink the destination and open(2) a new file, where dd does open the existing file, but using O_CREAT|O_TRUNC (i.e. all existing extents are released):
lseek(0, 0, SEEK_CUR) = 0
open("/var/tmp/foo", O_WRONLY|O_CREAT|O_TRUNC, 0666) = 3
dup2(3, 1) = 1
This will be fixed when we implement inode monitoring and automatic refresh of the region table but until then we can only support in-place IO.
We should note this in the man page/release notes, or a kbase article - it's going to be fairly common with tools like cp/dd and is confusing for the user.