TK-228 said:

That does help. Thanks. I figured I'd ask around here because I was hoping someone else had this problem and would be able to tell me what they did to correct the issue. NTFS is my best bet. I'll just buy a new drive to keep it simple. Thanks again.

An easier way: first mount the ISO using Virtual CloneDrive, then use tsMuxeR to remux the m2ts stream from the virtual drive to an AVCHD folder on your FAT32 drive (in the Split/Cut tab, split the files every 4GB).

(BTW if you want to play on a PS3 you can use AVCHDMe to rename all the files inside the the BDMV folder to be 8.3 compliant.)