Well, if you were on a PC, I would suspect the old MSC/MTP confusion. I believe the MAC will only work in MSC mode so two things:
Has this thing ever been loaded from a PC
You don’t mention if you actually did a format. I would do this (after saving loaded music), check only minimum space is being indicated by both your machine and the device. Check the device under settings, then go from there.
since you are using a MAC the first question is, have you deleted files from the device? if so did you disconnect the mp3 player before emptying the trash? if so this is what is causing the issue. when files are deleted from a removable drive on a MAC you have to empty the trash before disconnecting the device. if you do not it will not actually free the space. you can try connecting the mp3 player back to the MAC and empty the trash to see if that will free up the space. if it does not you will have to use disk utility to format the drive. make sure you choose MS DOS as the file type if you have to format in disk utility. once formatted you will see all the free space and you can reload your files. if you delete files in the future make sure to empty the trash before disconnecting the drive.
I don’t use a Mac and certainly drlucky’s explanation makes sense. I’ve never paid much attention to the trash folder on a pc. It looks as if devices like flash cards and I would assume floppies don’t have one, external usb hd does. I suppose the Mac approach is more logical. On a pc, it’s possible to have a drive not use the recoverable trash feature (right click on trash icon and select properties). Does the Mac offer similar flexibility?