Yeah. It's been firmware-limited to 34GB, either because of some OEM requirement (probably), or because the drive has so many defect sectors, it couldn't be sold as a 40GB, so they capacity-clipped it, and sold it cheap to some OEM customer.
You could always try using a version of the IBM/Hitachi HGST "FeatureTool" program and attempt to reset the capacity-clip. I would test/zero-wipe the drive carefully afterwards, to ensure that whatever space that you freed up isn't flaky/bad.
Also, be aware that changing the firmware soft-clip LBA limits will likely make existing partitions on the drive invalid, so don't do this with important data on the drive. (That not 100% true in all cases, but better safe than sorry.)