I'm not sure the reason, but I had a similar issue the one time I tried to use an SD card although it was a 4 gig card, not 32. I wasn't sure at the time if it was my card or the Touch, but since I was just trying it to quickly listen to something to compare I didn't have the time or inclination to try multiple re-formats ect. So I don't know what the problem is, but can confirm that I've had the same issue.
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