relaxxx,
If you have problems installing the Convert Tool on the WinXP machine, try this Knowledge Base:
How to: Solve problems installing AMV/MTV Converting Tool
Yeh, I've read a lot of post with people losing memory storage after formatting, but then again, after formatting will probably bring the player back to it's ORIGINAL memory size that's on the player. There has been a few dodgy people who 'hack' it to show up more memory than what is actually on the player and that's half the problems people get as they try to fill up their player but obviously it can't hold that much.
You can try formatting using the Format tool from the "MP3 Player Utilities 3.68".