You're logged into the f/w I suspect. Go to the other options. Sd recording, ftp,etc.
You can also verify by going to the live image, the recording symbol will flash when active.
I'm not able to verify at the moment, but fat32 sounds right.
@RYAT3, just thought I'd let you know I managed to get the SD card to be recognised by the camera in the end. I ended up formatting as FAT32 on my PC (actually on a Mac running Parallels with Windows 7) and it works.
However, I later played with the options and found out what could be preventing the formatting - apparently there is a (default) event configured under Setup --> Event Setup that accesses the SD card, and I think that may be why whenI tried to format the card is always says busy although no recording it taking place. I also found those FTP server etc that you were talking about.
Anyway, it works now and I'm happy...
Thanks again for your help.