I fought with USB hosting on my Xoom for months. I found that no app was consistent in getting things to show up properly. Often I would have to reboot before it would recognize the drive file structure with FAT32 or NTFS. A couple tips that helped in the end:
1) Formatting elsewhere first is fine, but I found plugging in an empty drive into the Xoom before loading anything on it allowed it to add the lost.dir directory. After that I don't recall having issues with the hosting, but only if I let it add the directory before loading files from a different location. Not sure why it helped, but it did in my case.
2) The most reliable method for getting it to work seems to be a custom ROM. I'm running CM9 and don't recall having a single hosting issue since loading.
1) Formatting elsewhere first is fine, but I found plugging in an empty drive into the Xoom before loading anything on it allowed it to add the lost.dir directory. After that I don't recall having issues with the hosting, but only if I let it add the directory before loading files from a different location. Not sure why it helped, but it did in my case.
2) The most reliable method for getting it to work seems to be a custom ROM. I'm running CM9 and don't recall having a single hosting issue since loading.