It is JUST NOT TRUE that there is a 4GB limit!! The largest drive that it can handle the old native way is 32MB. The largest drive it can handle properly and efficiently, with clusters, is 8GB!!!!! The largest it should be able to handle, at the cost of MORE wasted storage(Clusters increase the minimum amount of storage you can allocate, and increase in size once you go past 32MB for the disk), is 2TB!
FORGET all the questions, I can guess the answer. Are you putting all the files in the root part of the drive? M/S never bothered to allow much space in the base directory. If you store all your files there, you are almost guaranteed to run out of DIRECTORY space! Try putting the files in a DIRECTORY on your USB drive.