Use a larger block size in HDToolBox and you will be fine.
Go for 4096 bytes per block and it willl solve your issue.
Is 4096 bytes per block the new recommendation for all use cases? Under what circumstances should we use a different setting?
The larger you set the block size, the fewer blocks are needed to cover a given size volume. And if you have fewer blocks, the formatting procedure will need to allocate fewer data structures in memory to keep track of the blocks during formatting.
Possibly simplified a bit, but that's the main idea.
On all systems.
So use a larger block size if you don't have enough memory for a higher number of blocks/data structures. The price, as mentioned by TribbleSmasher above, is that smaller files take up more space, because you cannot use less than one block per file for its data, no matter how small the file is.
Best regards,
Niels