Of course FAT32's limit is over 320GB, the issue is that Microsoft sees FAT32 as an outdated file system and would just rather you use NTFS, therefore doesn't let you format anything over 32GB using the windows formatting tools. Even using command line formatting tool doesn't let you do this.
I tried using command line to format into FAT32 and a message pops up nearing the competition of the format stating "The volume is too large for this action to be completed" or something along those lines.
As said on wiki,
"A limitation of 32 GB applies to the Windows 2000/XP installation program and filesystem creation tool. However, both systems can read and write to FAT32 file systems of any size. This limitation is by
design and according to Microsoft was imposed because many tasks on a very large FAT32 file system become slow and inefficient. This limitation can be bypassed by using third-party formatting utilities."
http://en.wikipedia.org/wiki/File_Allocation_Table