Someone on the firmware 3.0 thread experienced the same thing I did with the formatting.
Fiio responded very quickly to an email I sent on the formatting issue with firmware 3.0. Here is their response:
Thanks for your mail and support to FiiO!
Regarding to your problem, we suggest you use a tool to press your X3's reset hole then reinsert the SD card to have a try.
Could you inform us whether all of your SD cards can't be formatted by the X3 running FW3.0? We can use our X3 running FW3.0 to format the SD cards without any problems. We suggest you update your X3 to FW3.0 again.
You also can click the link below then search GUIformat, and then use the GUIformat software to format your SD card as FAT32. Pls note that, the allocation unit size is suggested to choose 32K or lower but not 64K when you formatting your SD card.
If you have any other question, please feel free to contact us!
Have a nice day! ^_^
I let them know that more than one user experienced the need to format to FAT32 before the X3 could format the card. Maybe someone can try the reset or re-install the firmware and see if that works.