If you are ordering a bulk of these - open one of them and see what flash chips are inside. This will enable you to check actual capacity vs what your seller is saying.
As for the block size: You can "increase" capacity by lowering block size ONLY if you put a lot of small files on that drive. And by "small" I mean kilobytes, not megabytes. For MP3s, photos, videos - it does not matter.
Most suppliers seem to be saying the capacity is 128mb-64gb. Any idea what they mean by this?
I am not sure what you said regarding block sizes is the same as what I meant. From my understanding the entire block gets written either 1 or 0. So the filesize would be irrelevant as each block would still only represent 1 bit.
I am sorry if I have got the wrong end of the stick. I have done a lot of reading on it but have not found a good complete article that explains it all properly.
From filesystem (e.g. Windows) point of view, block size is the allocation size by which the OS divides the disk. So, if let say you have a block size of 8kb, and a disk size of 1mb (128 blocks), you will be able to write maximum of 128 files, even if those files were 1 byte long.
What you think is the "flash sector size" (I am not sure whether this is the technical term), which depends on the hardware inside the disk. This is the amount of flash storage which gets written / erased in single operation. This has much more to do with SSDs rather than with garden-varietry USB flash disks.