My guess is:That's actually not necessarily true - Xenoblade Chronicles in particular freezes on a cutscene if the default split is used; the split needs to be made elsewhere in the file for the game to work properly.
That points to a bug that needs fixing, rather than a limitation of FAT32 as fragmentation on WBFS & NTFS will introduce similar problems. All cios gets is one long list of fragments, whether they are from one or two files should be irrelevant.
The video player in xenoblade reads the video from disk while playing.
It makes assumptions about the time needed to access the next frame.
When it encounters the split in the file access time will be higher since the other file is likely to be located somewhere else.
To verify copy non working files to a flash based medium and try it from there.











