I found some useful formating instructions at http://osx.tribe.net
FAT 16 only supports 2 GB or less. I had no problems reading FAT 16 formatted SD cards in Leopard. I revised the instructions a bit:
To format the SD card, you will need the path to the SD card device and the SD card device number.
1. Insert the SD Card into a card reader.
2. If you don't know how to find the device number of the SD Card, here is one way to do it:
2b. Open Disk Utility
2c. Highlight the SD Card device (upper icon), not the SD Card volume (lower icon)
2d. Click Erase
at the top of the window
2e. Select Volume Format: MS-DOS (FAT)
> Click Erase
The SD Card Volume Name will change to the UNIX device number e.g. "disk5s1". Note this number as it will change by itself to "Untitled". It is now formatted in MS-DOS FAT 32. We need to reformat it in FAT 16.
Once you have the device number of the SD Card, you need the path to the SD card device.
3. For my Mac, the path to devices is "/dev". In a terminal window: type "cd /dev" and hit the "Return" key to go to the "dev" directory. Then type "ls" (with a lower case L) and "Return" key. You should see the SD Card device number listed.
Formatting the SD Card in FAT 16:
4. In Disk Utility, highlight the SD Card device and click Unmount
at the top, not
Eject. The desktop icon of the SD card will disappear.
5. Go to the Terminal window. Be careful to type the following command with the correct letter case and spacing. Again, make sure you type the correct device number and path as you can very easily erase your hard drive in UNIX.
Type the command:newfs_msdos -F 16 (path to SD Card device)/(SD Card device number)
e.g. newfs_msdos -F 16 /dev/disk5s1
and hit the "Return" key.
6. If you get just a new prompt (or a prompt with some warnings, e.g. below), the command executed successfully. You can remove the SD Card; it is now formatted in FAT 16. You can verify this in Disk Utility after mounting the SD Card.
If you get some instructions on the newfs_msdos command with a new prompt, the command did not execute. Make sure you enter the command with the correct case and spacing. Hint: to re-enter a previous command you typed, hit the up arrow repeatedly. For more information, type: "man newfs_msdos". Scroll with arrow keys. Type "q" to quit and return to prompt.