I've noticed that I ALWAYS seem to "lose" space on a flash drive, when I format it in Windows 7. Doesn't matter if I use the HP format tool, or just Windows' built-in format.
Somehow, the mfg is using a FAT32 formatting tool that formats out to more space.
At first, I thought that my testing with vconsole.com 's USB testing (low-level write/read tool) was causing the flash drive to remap bad sectors, and then a subsequent high-level format was showing the effects of that, but when I did that three times to three different flash drives, and their original and new format sizes were identical (Edit: Between the three flash drives - the after format size was smaller than the original though), I realized that it wasn't just bad sectors. (What are the odds that three flash drives have exactly the same number of bad sectors mapped out during a write pass?)
I figure it has to do with the offset that Win7 uses when formatting things, compared to XP and DOS.