Yeah, any drive should be fat 32 formatted for most reliable play, although the most recent radios may be more tolerant.
Dunno what file error means to these radios, if the drive is in the wrong format I don't think that radio even detects it. File errors are generally corrupted music files, unsupported music file type, or a bad USB stick. You may want to try to reformat and reload the files (or just buy another card). Play them on another device (computer) to verify they are good.
The radio can only play a few file types, like MP3. If the music is in something like a FAC file, then the radio may have trouble with it. I loaded mp3 music files onto my SD card and they play well and the meta data is displayed on the radio screen (song title, artist, album). The supported file types depend on radio, I think. Your owners or radio manual should have a list of acceptable file types.