I recently had a USB drive, that was formatted as FAT32, that throw Error 0x80070052 anytime I tried to create a new directory or file on the USB drive. After fiddling around a bit, I narrowed the cause down to the fact that I had a bunch of files in the root directory of the USB drive. Once I moved all the data into folders and narrowed down the folder count to about 4 root folders, the error went away. I assume that a FAT32 USB drive has a limit to the number of files that you can store in the root folder and by putting everything into sub-folders, you can get around that limit.
I recently had to format a drive as FAT32. But if you use the Windows 8 GUI formatter, you will realize that the only file system it lets you pick is NTFS. So I found this utility that lets me format a drive as FAT32: http://tokiwa.qee.jp/EN/Fat32Formatter/