Bronco, If you bought your player as an 8GB player it has or had a fake memory chip that was hacked to read as an 8GB chip. The most memory these players can support at the moment is 2GB which is what I would say is your chips true size.
The reason you were having problems with corrupt files and folder was because you were starting to load your player over it's real capacity of 2GB. When you formated the player and applied another firmware the hack was removed from your chip and now it's true size is diplayed. You can not get back the lost space as it was never really there in the first place.
To confirm this you need to open your player and check the serial number of the memory chip against this list
HERE to verify it's true size.
Your player has a blue screen because the firmware you loaded is not suited to your player. If you do not have a backup of your original firmware then you will have to try other firmware until you find one that is more suited to your player.