A foxhead copy (which were inferior to the original) was used to aid in bringing down Demandred. but earlier in the series Mat is killed by Saidin while wearing his original (and brought back by the effects of balefire)
Is this a plot hole or is there and explanation?

The lightning that killed Mat was real lightning, it was initiated by saidin but was real when it hit him.  Similar to how Elayne & co threw clods of earth (poo?) at him on the way to Ebou Dar.

Basically the medallion only stops "direct weaves". Indirect ones such as someone creating lightning and then the effects hitting Mat will not be stopped.

Which explains, also, why it only helped against Demandred. Demmy tried direct weaves, didn't work, so he tried a few more tricks.

Ah! Spanx!  
 

Which leads to the question, how could elayne copy the terangreal if it "melted" weaves?

While holding the original foxhead medallion, one could still channel and it would not melt weaves directed into it.  It is only when it is touching the skin of someone, and weaves originating from someone else that the weaves are "melted"

I was also confused about this as I thought the copies were inferior and only stopped the weaker weaves

The copies originally prevented you from channeling while wearing it which the original did not.  However Elayne appears to have figured it out prior to the battle in ToM.

Direct vs. indirect weaves. Neither the original or the copies could stop indirect weaves.

 

I doubt that even the original could stop Demandred+his sa'angreal. Too much raw power, the Weaves would be too large to disperse.

 

Certainly Rand and the Choden Kal, nothing will stop. I seriously doubt that even the gholam could survive that much raw power directed at it. The Weaves would be earth shattering in size. At one point, Rand was the Death Star.

 

Very doubtful that the ter'angreal could stop the True Power weaves. Even more doubtful that the gholam could, given that would be an affront to Shai'tan...Agnior was mad, doubtful he was that mad and stupid.