No this question was NOT answered. This problem drove me crazy until I figured out the answer. I had 2 USB flash drives and they were both behaving as described above. The 2 Gb model would only hold about 128mb of photos before it would report "not enough free space" to copy any more. I tried everything. Reformatting with MS-DOS, FAT 16, emptying the trash, repartitioning. Nothing worked until I plugged one of them into a real windoze box and formatted it with Fat-32 (win32s). Now I can copy all the files and use all the space. It is very slow, however. Thanks Apple, for finally getting to the bottom of this.