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The thing is Steam works a little differently to other platforms because games are downloaded both encrypted and compressed. This means that when they download you need to allow up to THREEE times the total file size so it can do all it's file sorting work.
Also because of this, it ain't your net speed that limits this, it's actually a combination of your net connection, hard drives, CPU, RAM, I/O and so on.
So a common way of getting the issue you're having is to not have enough space on your target drive as well. You should never go over about 90% usage on your install drive, and also remembering that "up tot three times" thing means it's easy to forget.
For example, if you have a 1TB drive, and you've used 800GB, you're fine because you have 80% used. That leaves you 100GB left to play with.
But if you then go to download a 50GB game you likely won't have enough because you would need to allow up to 150GB taking you way over the 90%.
And when you go over this you will likely get slowdown like you're experiencing, downloads going to another drive, or it just stop and start weirdly.
Also, to check if there is any part of your PC bottlenecking you can both monitor the graph on the downloads page as it shows how both hard drive connection et al are going. Couple that with Windows Task Manager and you should see if something's gettnig hit hard.
The most important thing is to have the 3x space on the drive you are installing to. Restarting was needed also, after making more space on the drive.
Yeah, I'm notquite sure exactly how it works, but you're right in that as much space as you can give it does indeed improve things.