IIRC Windows was restricting usage of FAT32 since Windows 2000, in favor of NTFS. And it is actually a good thing. NTFS is far superior than FAT32 in almost any aspect.
However, this activity come beyond reasonable amounts in my opinion. Simply put, you just can't format a drive larger than 32Gb into FAT32 using any modern Windows OS (Windows Vista/7/8, maybe even Windows XP). This is very, very annoying. I'm fine then you can't do something using standard approach, but I want be able to do that I want somehow, even if this is sounds unreasonable.
Now, users must fix that Microsoft must do itself. This utility (click on image to download) by fine fellas from Ridgecrop Consultants Ltd. do the thing. Since it's very valuable tool and "teh internets" fail us sometimes, here's a copy in the SkyDrive cloud.