Not really sure, but I know my 128GB drive is formatted FAT32 and has no problem when I copy my library to it (about 8GB, 16,235 Files, 5,384 Folders).
Is the library all contained inside of a folder (mine is called 'Library') or are you copying all of the individual author folders directly to the root? IIRC FAT32 has a limit to the number of files/directories you can have directly in root (512 I think?).
Perhaps try a fresh reformat (FAT32) on the drive or use NTFS (if everything you'll be using it with with support that).
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