Oh I have to disagree here. Windows can format 720K disks just fine.
Not easily mind you but it can do it. You just have to think like a Micro$oft programmer. You have to take away choice by removing the GUI cause noone should be using 720K disks anymore anyway, right?
Having struggled with this problem recently myself here is how you can format a floppy as 720K in WinXP.
From a command prompt:
FORMAT A: /T:80 /N:9 /X /V:EMPTY /FS:FAT
Obvious right

Just add this one to the stack of one more reason M$ stinks.