I noticed the same thing, but haven't done anything to fix that problem.
I also tried using a portable USB hard drive and it also works, as long as it's formatted as Fat 32.
One draw back, is that when I leave the drive plugged in and turn off the car, the unit seems to reset and when you turn it back on, the FM radio comes up, not the input you had before shutting down.
Has anyone tried using the DVD override module from PrestigiousSociety.com?