What does "Insufficient BTC at address X (Need approximately Y BTC.)" mean?

It’s not a “commission”, the only reason the sender needs BTC is to pay bitcoin miners (tx fee) because all Counterparty transactions are recorded on the bitcoin blockchain.

If there’s enough BTC at the address to pay for a transaction (say, more than 0.00005), it might be a bug in UTXO selection by Counterwallet, or something like that. You can test that by using one of alternative wallets which may not have the same issue. Not all alternative wallets support testnet, though.