well, there's obviously no 32gig limit hurting you since it recognizes 38gigs. anyway, here's the deal...hard drive manufacturers advertise sizes based on 1 billion bytes=1 gigabyte. however, this is not technically correct...i don't remember the exact conversion but windows goes by exact size, not the "rounded size"
i have found that a very close approximation is 93%...meaning that if you multiply the manufacturers spec by .93 you will get the size windows reports
edit: a little oops, i didn't notice the part about the little red sign, i was just addressing the size discrepancy between the manufacturer and windows