yeah try mp3.
1.are you using music bought from iTunes store, obviously that won't play cus of DRM.
If you have DRM free stuff you can use 'create mp3' in advanced menu in iTunes. make sure you set the import settings to mp3 in iTunes prefs.
I wouldn't format the drive (using your computer), it will likely break it.
My experience of walkmans are you have to use propriatory software to put music on, which wraps it in DRM for you. I'm not sure if tht still happens.
2.Can you find a manual in english on the interwebs for it?