It turns out that Windows XP won't let you format a volume bigger than 32GB with FAT32. I could use NTFS, but that's not what I FATlib supports. In fact, NTFS can only be written safely by Windows XP - there are as far as I know no other drivers for other OS's, unlike FAT which is supported by virtually anything.
As Microsoft put it here
You cannot format a volume larger than 32 gigabytes (GB) in size using the FAT32 file system during the Windows XP installation process. Windows XP can mount and support FAT32 volumes larger than 32 GB (subject to the other limits), but you cannot create a FAT32 volume larger than 32 GB by using the Format tool during Setup. If you need to format a volume that is larger than 32 GB, use the NTFS file system to format it. Another option is to start from a Microsoft Windows 98 or Microsoft Windows Millennium Edition (Me) Startup disk and use the Format tool included on the disk.
Using Windows 98 obviously opens up other issues - It doesn't support USB 2.0 or SATA as far as I know. Formatting a huge disk will take ages. It suports IDE, but not 48bit LBA, which is required for drives greater than 137GB. Also, you need to patch format.exe and fdisk to work with disks greater than 64GB. Even then scandisk will corrupt large disks unless you disable it. It can be done, but basically, this is ancient 16 bit code, and using it on modern hardware is not a good idea.
Note that the 32GB limit is a limit of the formatter in Windows XP. FAT32 itselft should be OK to 2TB, limited by a 32 bit sector count in the boot sector. XP comes with a partitioning tool, called Disk Management. It even has Wizards for partitoning. This should be a cinch.
