If you're trying to flash from the stock 1GB SD card (provided with the phone), then it won't work since it isn't FAT32.
One time I did not have a card reader on me and I was struggling to flash (all I had was a Mac which didn't have Windows loaded up on it).
I ended up using this to format that card as FAT32 (you don't have to select FAT32, it just does that):
http://www.nuerom.com/BlogEngine/pag...geManager.aspx
Then you're all good and can flash from SD.