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Hrm... I just popped my Lexar USB Jumpdrive into my laptop here and fired up the disk management utility (right click my computer, manage, disk management). I then removed the existing partition and created two new partitions on it. I formatted them with FAT and they seem to be working fine.
I'm using Windows XP SP2.
Hopefully this will help:
http://www.msfn.org/board/index.php?act=ST&f=82&t=69211&st=0#entry474505
Is there a way to reverse this? (i.e. have windows think it is a normal removable drive like it used to)