This is amusing.

The user confusion never would have happened had Microsoft never married the concept of partitioning and formatting. You can only format a drive letter if it is already in a partition format to RECEIVE a drive letter (IOW, understood by Windows).
The old way:
Launch FDISK
Delete the "Unknown partitions"
Create your own partition/extended partitions for specified, supported, file systems which will then receive drive letters
Exit FDISK
Format with the Format utility or Windows
Use as you wish
???
Profit
Now you have to go into the MMC and load the Disk Management snap-in (My Computer > Manage > Disk Management if you want to take the easy route), identify the disc with the unrecognized partition, clear it out, and create a formatted partition (or more) including a specified filesystem formatting.
Drive letters do not represent your physical drive so you can't expect to partition and format through them. It's that simple. You don't plug in a blank drive and get a new drive letter to format.
The only reason the "right-click a drive letter and format" capability is still there is for removeable media and erasing an already formatted drive.