Well what are you looking to really use it for?
Flash drives are limited to the USB 2.0 bus speed these days, roughly 25-30MB/sec. Me FAT32 works for me. Reason why, is because I can use the drives on DVD Players, X360, and even as a boot device leaving it as this format.
As for cluster size... for a flash drive 64KB probably would be the best. Going smaller might help somewhat but... smaller = more overhead. With a bandwidth limited situation looking at here, not only is it CPU intensive but it would be limited by the controller on the USB drive which can hurt perfomance which is what im sure you saw.