You're using FAT32. That file system will format the HDD in a way where you will not get the full capacity as advertised and reserve some space for system use if you use the Windows GUI to format. I believe you will not get the 116MB space usage if you formatted in true DOS or format using a utility outside of Windows altogether.
However, you could also use exFat that is introduced in Windows7 to get the full space.
http://en.wikipedia.org/wiki/ExFAT