I have similar problem with my
"pen-drive" EMTEC 256MB,
In my case it is the software problem.
Device works OK in XP or 2000 , but in win98 it depends.
Sometime it work if pen-drive is inserted to USB before power on.
Somtimes quite opposite, it works if connected during normal work.
Sometimes I get "blue screen" (unexpected error at location....)
Sometimes I get the same communicate as presented in original post: "remowebable disk is not formatted" (but after the power-off/of it works OK - no formatting is necessary)
Sometime removing "pen" from USB and insertin it again correct the problem.
I do not have a clue what procedure should be used for getting the stable work (or at least repetitive behaving).
I must add, that I have installed original software drivers for win98,
and the problems appear on few computers (even on the one with "virgin" WIN98 system)
After few months the problem dissappeared, (I do not know why).
At the moment on Win 98 I am getting communicate that the "removable disc" is not available" and after disconnecting and connecting again the files appear.
The similar problem is with WinXP , but the communicate is more direct "please insert the USB device" , the removing and inserting make the pen-drive be seen by the system.
I must admit, that in case of photo cameras (Konica Minolta, Sony) such things never happen. The files are always seen after first connection of cameras USB to PC and the system is always stable.