I think what Finch is getting at, and I have a USB Floppy Lacie drive, and I have got the same error.
Basically, if you stick in a floppy and lets say it's OS 9 or DOS formatted, under OS 9 you could stick in the disk and it would read it, no matter what was on it.
Now it seems that you stick in a disk and it won't read it unless it's a OS X formatted disk.
I assume this is what Finch is requesting. The floppy drive works fine, it's OS X's ability to read those floppies that appears to be in question.
WOW, never really messed with my floppy drive that much, just stuck in a known good PC formatted floppy and it read it. WOW. Not that I will ever need that in my entire life, but hey, still cool.
Finch, if you are getting your error, the floppy drive must be having issues reading the format of the floppy disk, you may want to see if you can verify it's functionality (floppy) in a system with a old fashion floppy drive.
Scott