It may not be just the larger capacity, but the newest xD cards.
Here is a quote from a Wikipedia article:
"The newer cards are also incompatible with some card readers."
I suggest you read the article at:
A number of years ago I bought my wife a fujiFilm S5000 and an xD card reader which she has used for all this time. Just recently she purchased a new 2 GB xD picture card which will not work in the xD reader. Her old card was only 128 MB in size. Do you think that the size of the picture card is the reason it won't work in the reader? And if so are there other readers that will handle a 2 GB picture card?