Hey Passbyer, well it seems that you might have a fake player on your hands. It might be that although the player appears and shows up as a 2GB player that it is actually of a smaller capacity like 1GB or less. Some sellers hack their players to try and have it show as if it has more memory than it actually does. You might want to contact the seller and try and get a refund as the seller is no good by trying to sell you a fake 2GB player.
About your second question, the best thing you can do is buy a headphone adapter (look at the link in my signature) which will allow you to use any standard headphone with the player. The advantage of having a headphone adapter is that then it will be easier for you to use any great headphones as most of the high quality and great sounding headphones are made with 3.5mm plugs and not 2.5mm plugs.
Hope that answers your question
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