It should accept most formats, but playlists were a pain. I ended up using Winamp to make working playlists, but it was a bit of a chore to manually do everything. Make sure file names are formatted correctly and without special characters, since that proved to be an issue when I was first rebuilding things on my flash drive.
I did notice one of my Sandisk Cruzer drives didnt jive with the system, but my newer 128gb Sandisk seems fine, as well as all the Verbatim drives I tried.