How is this possible (I managed to fit 2.05GB of movies on a formatted 1.9GB memory card?!?) - And weird memory issues!

You may not have any problems at all.

A 2GB memory card, will have a total of 2048MB of memory available. What Windows Explorer is seeing is the partition, that has been designated for data storage. a portion of the drive is reserved for control operations.

Many file formats, especially those used for Multimedia files, allow the data to be compressed, hence reducing the space required for storage. This also reduces the screen resolution and size, available for optimum playback.

Could be that compression has been enabled for this drive, meaning that Windows will automatically compress any files that are written to it.

To verify this in XP, right-click on the drive and select properties.

Somewhere near the bottom of the "General" tab, there's a check box entitled "compress drive to save disk space".

If this is checked, it explains everything.

As a bonus, you've got space for even more movies!

Right click on the file, select "Properties" and write down the file size in bytes (call this "A").
Right click on the drive letter for the USB stick, select properties, and write down the capacity in Bytes (call this "B").

I would expect A to be less than B - unless you are using compression. Comparing megabytes and gigabytes is usually futile as different folks use different methods of defining what they mean.

SI units mean that a mega-X is one million of X, and a giga-X is one billion of it. In computers, however, a "megabyte" is 1024x1024 = 1,048,576 Bytes. A gigabyte multiplies by another 1024 - however some computing applications quantify things in SI units, rather than computing units. I seem to recall some hard drive vendor got their wrists slapped for this as it artificially inflated the stated size of their drives.