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I own an Iomega Prestige 1.5 TB external that I needed to format to FAT32 in order to use with the Mac computers here. All simple stuff, I backed up the files on a friend's drive and used the suggested CompuApps SwissKnife software to format, simple enough. I selected FAT32 and the drive and all that and something happened and now I have a FAT32 formatted drive with 393 GB of space. I'm usually pretty tech-savvy but this is a little bizarre and I'm not sure how to approach it, any help would be appreciated. I'm using XP.
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What's your XP Service Pack level? It also may be necessary to use a particular tool from the enclosure's manufacturer or removing the drive from the enclosure altogether and connect it to a motherboard in order to format it.
Also check out if there are any size-limiting jumpers on the HD itself, or if the particular enclosure/chipset combo has a known history of pulling such shit: sometimes those cheapo USB-to-SATA or whatever controllers used on such enclosures (is it USB BTW? Firewire? eSata?) crap out on initialization and may do funny stuff all the way down to just stop working for no apparent reason.
I've once lost the contents of a 300 GB IDE hard disk because a (motherboards') IDE controller recognized it as 127 GB and there was no way to "convince" it otherwise.
Edit: Unless it's you again, this bloke on the Seagate forums seems to have the same issue as you.
There are limitations in Windows that prevent you from formatting large FAT32 partitions - however, there are plenty of third party tools that allow you to do it (Windows can still read them, just not format them).
I recommend using the HP USB Disk Storage Format Tool. I use it frequently to create bootable flash drives and it has no problems creating large FAT32 partitions. GPartEd can also do it, assuming it can load appropriate drivers for the USB interface.
I've also used Partition Magic to do it in the past, asides from giving you a warning about the limits, seems to work fine. Not free though.