I recently bought a Sandisk cruzer micro 4GB USB stick and of course it comes with that U3 crapola preloaded on it.
Formatting the stick does not get rid of it entirely. If you click (in Windows XP) Start then Run then type COMPMGMT.MSC, click OK, then click Disk Management from the window that appears, you’ll notice there are two partitions on the stick, one of which is a CDFS system labeled "U3 System".
Try as you might, there’s no way to get rid of it from there.
There are two ways to get rid of this stupid thing to reclaim the space.
First method: Load the stick in Linux and use your partition software o’ choice (like GParted) to remove it.
Second method: Use the U3 uninstaller program for Windows. Just click the "Remove U3" link there to download the program, then run it to completely format the stick to reclaim all the space back.