While I don't know the precise answer to the question of copies, as I understand it, you need driving license and photo ID, so new style driving licenses with photo is sufficient and no passport needed.
I was stopped at Easter. I showed the GNR my passport, hire-car agreement and my UK photo driving licence . . . . and I was allowed to continue my journey.
We usually carry photocopies of passports and driver's license. The Canadian driver's licenses have a photo. Have been stopped once with no problems, the officer seemed to be more concerned with the rental car papers. He was very friendly and polite and spoke very good English.
Technically I think that you need to carry the originals of your passport or residencia and your driving licence. Some people carry certified copies of these documents but a friend of mine who was stopped by the police and had these was told that he must have the originals. Also you if you produce a residencia with a UK druiving licence you have to have a paper to show that the licence has been registered with the DVG.
Thanks for all the tips and info, think we will keep to the safe side.
Question came about as an aquaintence of ours who live in the algarve, driving a port reg car was stopped by the police and not having passports with them were escorted home where they had to produce these documents.