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Yes, a MagicGate is different than a traditional Memory Stick. At one time it was the line for the PlayStation and music while the regular one was for the cameras.
According to page 19 of the original Reader manual, both can be used in the Reader. The MemorySticks can support up to 4 GB while SD cards can support only 2 GB.
If this is true then the only problem (assuming that it is not a faulty memory) is the formatting. However as dhbailey noted, he has trouble with both formats.
Perhaps there is a utility at the Sony website for formatting the sticks.
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