Format ext 320G USB HDD as FAT32, lose 1/2 the space?

I have a frustrating issue.

I got in 2 different external USB HDDs: 1 is a 3.5" 500GB drive, and the other is a 2.5" 320GB drive. I need these to be bootable to DOS, so I used the HP USB Disk Storage Format Tool to format them as FAT32 and make them bootable.

On the 500Gb drive, everything went fine.

On the 320GB drive, it seems to work fine but I'm left with 150GB "used" and 147GB "free" right off the bat.

Both drives are using 32K clusters.

I thought there might be something wrong with the drive so I tried formatting it as NTFS and it was fine. Several attempts at re-formatting it FAT32 continue to come up with the same result.

Using multiple partitions would be a big hassle in this application, and the fact that the 500GB drive works fine leads me to believe there's a solution here somewhere so I'd rather fix the problem than cumbersomely work around it.

Any thoughts?