There's link (which you probably have already seen ) on the ebay web page you purchased the adapter from with directions for getting it working in a ipod
http://www.maxorigin.com/A-Ric/ipod_cf/IPOD_CF.htm , in this tutorial they say it needs to be formatted and also that they tested with a 1 gig and 2 gig cards. I take it you tried formatting it with the iriver firmware as well as windows explorer? I wonder if a program such as swissknife would do the trick? *scratches head*