It sounds like you either have a bad card or a bad SD card slot on your Treo. You should see about 1.8GB on an empty 2GB card. To determine which is at fault, you can either throw it in a card reader, or grab a trial version of
Card Export II. This will let your PC see the SD card in the Treo as an external drive. Then check the card properties in Windows.
If the card doesn't work in Windows either, then you know you have a bad card. To rule out the card slot, either borrow a known good card from a friend, or pick up a cheap card, 128MB should be around $20 if not less. If the new card works, then the slot is fine.