I agree with you. The manual only mentions sizes up to 256Mb, which makes it look like this is the size limit. However, there is no actual mention of such a limit. Other, more general Kodak pages certainly imply that this camera will accept a SD (not SDHC) card of any valid size (up to 2Gb, in other words).
I have read the manual for your camera, and searched the Internet, and I have not found any other mention of the largest size of card that your camera can take. However, I notice that a LOT of people have been posting to fixya complaining that their 2Gb cards are not working in their CD33 camera. This would definitely imply that this camera has a problem with the larger sizes.
There are two possible outcomes/solutions for your situation. One outcome is that your camera can't take such a large card, and Kodak didn't tell you, because such large cards weren't available at the time it was made. There's a faint chance that downloading the latest firmware for your camera might fix this, but frankly it sounds like a lot of trouble. You can access loads of CD33 data, including updated firmware, from here:
http://wwwuk.kodak.com/global/en/service/products/ekn030872.jhtml?pq-path=7489#The second solution is that the card simply needs to be formatted. In theory, a card should be already formatted when purchased, and further formatting should not be necessary. However, the manual is quite insistent that YOUR camera needs the card to be formatted again in the camera, and of the handful of other similar posts on this site, a couple had gurus instruct the posters to go through the formatting procedure. Unlike the 'firmware' suggestion, this one is definitely worth a try. Ensure that you have nothing of value on the card, and follow the format procedure in the camera menu:
http://wwwuk.kodak.com/global/en/service/publications/urg00452toc.jhtml?pq-path=7491
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