[Kinkell]

No, it's nothing that fancy, it's just about changing the parameters of the internal tables that describe the layout therefore apparent size of the removable disc.
A friend of mine bought what was advertised as a 4GB player off eBay, files and directory corrupted after more than 960Megabytes was stored.
Re-partitioning / re-formatting confirmed it was really 1Gigabyte.
The eBay seller sent the tool that would 'fix' in fact re-hack the player - it's a slightly customised version of the standard 'MP3 Player Disc Manager'.
How it worked in this case was - plug in the player, start the Disc Manager, click the Partition tab, press the right arrow once to get 1MB size for the encrypted partition, and after partitioning the result is a single 4Gigabyte partition again. Still only holds just under 1Gygabyte of data before the files write over already used space.
Again it's a confirmation that the scam is a deliberate and cynical way of parting people from more money than they would otherwise pay.
Even Uxcell get caught by their suppliers sometimes - the 2GB Osmium I bought was actually 256Megabytes. Uxcell replaced it with a genuine 2Gigabyte Osmuim - it now works just fine.