How can I format USB flash drive to FAT 32.

Use 'Disk Management' to delete the existing partition and create a new partition and format FAT32 or use one of the 2 utilities listed below:

------------------------ Partition Management Utilities -----------------------------

Partition Wizard Home Edition:
http://www.partitionwizard.com/free-partition-manager.html
Note: There is also a bootable CD or bootable Flash drive versions:
CD: http://www.partitionwizard.com/partition-wizard-bootable-cd.html
Flash Drive: http://www.partitionwizard.com/bootable-flash-drive.html
Some of the features and Functions include: Create partition, Delete partition, Format partition,
Resizing a partition, Move partitions, Restore Partition after accidental deletion,
Convert partition, Explore partition, Hide partition,
Change drive letter, Set active partition, partition explorer (View contents).
Note: To complete any task use the 'Pending Operations' box located in the lower left.

Alternative to Partition Wizard (Somewhat easier to use but both Partition Wizard and EASUS have nearly identical user interfaces)
EASEUS Partition Master Home Edition (Free):
http://www.partition-tool.com/
ALL-IN-ONE partition software and the most convenient hard disk partition manager toolkit
Includes Partition Manager, Disk & Partition Copy Wizard and Partition Recovery Wizard on MBR and GUID partition table (GPT) disk under Windows 2000/XP/Vista/Windows 7 and Windows Server 2000/2003/2008 (32 bit and 64 bit).
It allows users to Resize/Move Partition, Extend System Drive, Copy Disk & Partition, Merge Partition, Split Partition, Redistribute Free Space, Convert Dynamic Disk, Partition Recovery and much more.

J W Stuart: http://www.pagestart.com