I use an 8GB Flash Drive and have had no problems with mine so far, also plugged my iPhone 4 into USB and it will play music from my phone that way also with no problem.
The Flash Drive is the easiest to use with the pre-sets, plus you could get a 16GB Flash Drive and that should be plenty of music, heck even my 8GB has over 500 songs on it and thats just 1.9GB used!

 

Mine locked up on me yesterday as well. iPhone was connected via the USB and would not index through the songs using the left thumb joy stick. It would allow me index through songs if I connected via the Bluetooth. After figuring that out, after a quick warm up break, I input an address and started down the road, at which point the screen locked onto the "Tuner" select page. Good thing I didnt need the Nav to get where I was going. When I arrived, I shut everything down and when I fired back up, the info. system was back to "normal"?

Starting to look like there may be a disconnect with the iPhone in some small way that is causing a glitch, I hope not as I love my iPhone.

 

Per HD's website these are the only phones compatible with either the 4.3 or 6.5 Infotainment radios. Could be why some are having problems, just a thought.

Apple iPhone5 SprintiOS (6.1.3) 09/2012
Blackberry 9860 AT&TBlackberry (7.1 Bundle 1997) 11/2011
HTCDroid DNA Verizon Android (4.1.1) 11/2012
LG Enlighten VS700 Verizon Android (2.3.4) 11/2011
SamsungGalaxy S III Sprint Android (4.1.2) 06/2012

 

I am using a 32GB flash drive and it's working fine. It does take a while to index but once it's done it works fine.