Morning guys,
I was having the very same issue since the launcher was released. I finally figured it out last night and will be posting a tutorial soon.
The quick run down. Under disk management look at your drive and see if there is a small partition at the very front of the drive. (This could have been created by the external case or the formatting program you used)
Windows will NOT let you delete, or move this partition. However this is the issue that causes all the issues. Use G-Parted, and delete the partition. Make sure the partition that you want WBFS formated, is the first thing on the drive. Format the partition as FAT32 for now.
Once done, you may have to re-initialize the drive on the computer (Or another computer) for it to be recognized in XP or vista.
You should now be able to format via the WII or PC, and everything should now work!!!
This was driving me crazy!! I am so glad I was able to fix it.