wtleong, Your chip is actually only a 1GB here is a link to the Hynix Data sheet for the HY27UF081G2M Nand Flash
HERE
Some of these players have memory chips that have been hacked so that they appear to be larger than they really are. When you format the player it removes the hack and you are left with the true size of your chip.
You should be able to recover another 800MB or so.
Open the MP3 Player Disk Tool and select the Partition encrypt tab and make sure the slider is all the way left at zero.
Then use this program to format your player
DOWNLOAD
You should also contact your supplier and complain, if you got it from ebay you should post bad feedback, also contact ebay regarding the problem and if you used paypal you may be able to do something there as well.
Sorry to be the bearer of bad news, let me know if you are able to increase the amount of usable storage.