The flash drive can certainly be reformatted. I've seen reports of Windows being unable to format it using the standard explorer menu option for some reason, which is a bug in Windows, IMO. The format operation is exactly the same regardless of the contents of the drive, and Windows shouldn't be looking at the contents at all. Nevertheless, it doesn't work for some reason, so what you need to do is go into the Disk Management application as described here, delete all the partitions on the drive, and then create a new FAT32 partition which takes up all the space. (If someone is willing to create a guide with screenshots, I'd appreciate it, as I don't currently have access to a Windows machine.)
The camera formats it to FAT and I just reformat to FAT32.
Using Disk Management, the drive shows 20M Healthy and 980M Unallocated. The only option that isn't greyed out in "delete" for the 20M partition only. Shrink isn't available on any USB flash drive that I looked at. Maybe Diskparts from the command line but it seems like it shouldn't happen. May have move some files around to loosen up a normal USB flash drive for use.