With FAT16 the cluster size is 32KB if the partition is 2GB - a smaller cluster size will prevent you from creating a 2GB filesystem so in this case, FAT32 has the advantage of allowing you to create a 2GB filesystem with a smaller cluster size than 32KB which should allow more efficient storage of small files. Not quite sure how 18MB becomes 160MB though, unless you had hundreds of files substantially smaller than 32KB. You might be better off with an 8KB-ish cluster size. You can format your MMC card using FAT32 from the command line.