Just to document the issue I am having:
Device worked fine. Tried to sync Windows Media Player files to phone. Phone and Windows Media Player locked up during sync. (Used phone as hard drive not active sync).
Unplugged phone from pc. Re connected and now no 4gb storage.
Did hard reset multiple times. No fix.
Can browse and see Internal Storage folder
According to
http://forum.xda-developers.com/showthread.php?t=426520 the problem might be that internal folder not mounting correctly. I deleted the folder and am now doing a hard reset. Will post results.