The reason why iRiver doesn't use the NTFS format is because the company doesn't want to sell out to Micro$oft.
M$ has never released the specifications for the NTFS file system, so Linux has a hard time writing to it (though there has been work done to use native Windows drivers to do so).
iRiver in general has a Linux friendly attitude, but a Windows based target market. Therefor they have to use some filesystem that Windows supports (since M$ refuses to support ext2, ext3, reiserfs, etc). So they chose FAT32 so that everybody at least gets a shot even though that may mean that reformatting is a royal pain.
What they should do to compensate is include a utility that one can run from a PC that will reformat the drive to FAT32. (Or build that functionality directly into the device - though this would be serious trouble for confused user that accidently delete all their data
)