I’m posting this for other people’s reference as it’s something we run into frequently.
The hard facts
Windows has a really low default limit of 255/260 characters for path names. Microsoft’s information about this limit is here and you can see more technical info here.
The error(s)
This manifests itself in various ways but typically happens when SG Desktop is loading a config for the first time, it hits this error while downloading items into the bundle cache. The error can be somewhat cryptic though it looks like recent versions of Windows 10 have improved the error slightly. These are some examples of what you might see:
[ WARNING] Attempt 1: Attachment download of id 3265791 from https://xxxxx.shotgunstudio.com failed: [Error 206] The filename or extension is too long: 'C:\\Users\\xxxxx\\AppData\\Roaming\\Shotgun\\bundle_cache\\tmp\\0933a8b9a91440a2baf3dd7df44b40ce\\bundle_cache\\git\\tk-framework-imageutils.git\\v0.0.2\\python\\vendors\\osx\\lib\\python2.7\\site-packages\\pip\\_vendor\\requests\\packages\\urllib3\\packages\\ssl_match_hostname'
[ WARNING] File 'c:\users\xxxxx\appdata\local\temp\ab35bd0eb2b14c3b9458c67bceeed935_tank.zip' could not be deleted, skipping: [Error 32] The process cannot access the file because it is being used by another process: 'c:\\users\\xxxxx\\appdata\\local\\temp\\ab35bd0eb2b14c3b9458c67bceeed935_tank.zip'
ERROR sgtk.core.descriptor.io_descriptor.downloadable] Failed to download into path C:\Users\xxxxx\AppData\Roaming\Shotgun\bundle_cache\tmp\123456789012a34b567c890d1e23456: Failed to download sgtk:descriptor:shotgun?entity_type=PipelineConfiguration&field=uploaded_config&id=38&version=123456 from https://xxxxx.shotgunstudio.com. Error: Failed to download from 'https://xxxxx.shotgunstudio.com' after 5 retries. See error log for details.. Attempting to remove it.
WARNING sgtk.core.util.shotgun.download Attempt 4: Attachment download of id 1182 from https://xxxxx.shotgunstudio.com failed: [Errno 2] No such file or directory: 'C:\\Users\\xxxxx\\AppData\\Roaming\\Shotgun\\bundle_cache\\tmp\\dd2cc0804122403a87ac71efccd383ea\\bundle_cache\\app_store\\tk-framework-desktopserver\\v1.3.1\\resources\\python\\build\\pip\\_vendor\\requests\\packages\\urllib3\\packages\\ssl_match_hostname\\_implementation.py'
WARNING sgtk.core.util.filesystem File 'c:\users\xxxxx\appdata\local\temp\08f94bfe9b6d43e7a7beba30c192a43c_tank.zip' could not be deleted, skipping: [Error 32] The process cannot access the file because it is being used by another process: 'c:\\users\\xxxxx\\appdata\\local\\temp\\08f94bfe9b6d43e7a7beba30c192a43c_tank.zip'
ERROR sgtk.core.descriptor.io_descriptor.downloadable] Failed to download into path C:\Users\xxxxx\AppData\Roaming\Shotgun\bundle_cache\tmp\dd2cc0804122403a87ac71efccd383ea: Failed to download sgtk:descriptor:shotgun?entity_type=PipelineConfiguration&field=sg_uploaded_config&id=1&version=1182 from https://xxxxx.shotgunstudio.com. Error: Failed to download from 'https://xxxxx.shotgunstudio.com' after 5 retries. See error log for details.. Attempting to remove it.
ERROR sgtk.core.bootstrap.cached_configuration Failed to install configuration sgtk:descriptor:shotgun?entity_type=PipelineConfiguration&field=sg_uploaded_config&id=1&version=1182. Error: Failed to download into path C:\Users\xxxxx\AppData\Roaming\Shotgun\bundle_cache\tmp\dd2cc0804122403a87ac71efccd383ea: Failed to download sgtk:descriptor:shotgun?entity_type=PipelineConfiguration&field=sg_uploaded_config&id=1&version=1182 from https://xxxxx.shotgunstudio.com. Error: Failed to download from 'https://xxxxx.shotgunstudio.com' after 5 retries. See error log for details.. Cannot continue.
Why this happens
On Windows, SG Desktop stores data in your %APPDATA% folder (typically C:\Users\jane\AppData\Roaming\Shotgun. When using the standard default2 Toolkit config things should be mostly fine as long as your username isn’t super long. However, if you are creating your own apps, engines, or frameworks, you may have more risk of running into this, especially if you bundle dependencies with your code (as we do), and you have deep trees of directories in your bundles.
Working around the issue
The way to resolve this issue is typically to set a $SHOTGUN_HOME environment variable to something very short like C:\SG. This tells SG Desktop to store it’s data in C:\SG instead of C:\Users\jane\AppData\Roaming\Shotgun which saves you some characters and is usually enough to keep you under the limit. You can read about the environment variables here.
Future possibilities?
There may be another way to mitigate this issue with more recent versions of Windows 10 by updating the registry as described here but I think it also requires SG Desktop to update it’s manifest file to indicate it wants to take advantage of the longPathAware setting. I’m a Mac guy so I’m not sure if I’m just talking crap here 
Epilogue
I wish Windows didn’t have this silly archaic limit. Perhaps Shotgun will look at the possibility of enabling longer filenames using the method in the link above. But after hitting this issue multiple times with various studios, I wanted to ensure this information was in the wild for others to benefit from in case it’s useful.
Or maybe we’re the only ones that hit this on a regular basis? 🤷