How do you format a 2 GB SD card to FAT32 (preferably with Disk Utility)?

If you're comfortable with using the Terminal, try this:

First, look at the partition table by running this command:

diskutil list

You should see something like this:

/dev/disk1
#:                       TYPE NAME                    SIZE       IDENTIFIER
0:      GUID_partition_scheme                        *16.0 GB    disk1
1:                        EFI                         209.7 MB   disk1s1
2:                  Apple_HFS Example                 15.7 GB    disk1s2

The partition we want to change is /dev/disk1.

We want to change the device to an MBR-formatted FAT32 partition. To do that, run this command:

sudo diskutil eraseDisk FAT32 NAME MBRFormat /dev/disk1

where NAME is the name you want to give to the disk.

As mentioned in the comments, you cannot put square brackets into the volume's name lest things mess up. To avoid having everything fail, simply ensure that there are no square brackets in the FAT32 volume's new name.

Note: The NAME can fail if not UPPERCASE in many cases.

sudo diskutil eraseDisk FAT32 [NAME] MBRFormat /dev/disk1

Where [NAME] must be written in CAPITAL letters; otherwise, this will not work.

---

As mentioned in the comments, ensure that you use a tool such as diskutil to check which disk you are formatting. In the example above, the disk /dev/disk1 is being formatted. After finding the desired partition through a method such as calling diskutil list (This command lists the partitions on the system. See other answer for details), replace dev/disk1 with the desired partition.

This answer is appended as a backwards compatible solution for older Apple Mac versions, such as Snow Leopard 10.6.8, where "FAT32" as the filesystem type does NOT work as per the example below:

$diskutil eraseDisk fat32 mydiskname MBRFormat /dev/disk1

fat32 does not appear to be a valid file system format
Use diskutil listFilesystems to view a list of supported file systems

The internal command is:
diskutil eraseDisk filesystem disklabel MBRFormat device

where device is determined to be your SD Card using the command diskutil list.

Find the correct filesystem alias by typing this in Terminal:

$diskutil listFilesystems

Formattable filesystems

These file system personalities can be used for erasing and partitioning.
When specifying one as a parameter to a verb, case is not considered;
also, diskutil allows certain aliases which are themselves case-insensitive.

-------------------------------------------------------------------------------
PERSONALITY                     USER VISIBLE NAME                               
-------------------------------------------------------------------------------
ExFAT                           ExFAT                                           
Free Space                      Free Space                                      
  (or) free
MS-DOS                          MS-DOS (FAT)                                    
MS-DOS FAT12                    MS-DOS (FAT12)                                  
MS-DOS FAT16                    MS-DOS (FAT16)                                  
MS-DOS FAT32                    MS-DOS (FAT32)                                  
HFS+                            Mac OS Extended                                 
Case-sensitive HFS+             Mac OS Extended (Case-sensitive)                
  (or) hfsx
Case-sensitive Journaled HFS+   Mac OS Extended (Case-sensitive, Journaled)     
  (or) jhfsx
Journaled HFS+                  Mac OS Extended (Journaled)                     
  (or) jhfs+

In the output above you will see that there are aliases defined by "(or) something" but there is no alias for the FAT32 filesystem. You must specify the full name "ms-dos fat32" regardless of case.

Therefore, for an SD card connected as /dev/disk1, the correct procedure is:

1. Close any applications and exit any terminal prompt accessing the disk.
2. If you want to do everything manually then unmount the disk using:
   $diskutil unmountDisk /dev/disk1
   However, diskutil automatically attempts to unmount it.
3. Enter the following command, specifying your disk label and device appropriately:
   $diskutil eraseDisk "ms-dos fat32" mydiskname MBRFormat /dev/disk1

Output is:

Started erase on disk1
Unmounting disk
Creating partition map
Waiting for disks to reappear
Formatting disk1s1 as MS-DOS (FAT32) with name mydiskname
Finished erase on disk1

Finally, check the result using diskutil list:

$diskutil list /dev/disk1

/dev/disk1
   #:                       TYPE NAME                    SIZE       IDENTIFIER
   0:     FDisk_partition_scheme                        *1.0 GB     disk1
   1:                 DOS_FAT_32 MYDISKNAME              1.0 GB     disk1s1