The current version of Dynamic C only supports SD cards, and your 4GB card is an SDHC card.
There's early beta support for SDHC in the unreleased version of Dynamic C on GitHub (https://github.com/digidotcom/DCRabbit_10). If you download the "master" branch, you should be able to use 2GB partitions on your 4GB card. There's a known issue with 16GB cards (a timeout isn't long enough), but you should find success with your 4GB cards.
Follow the instructions in the README.md file to download updated libraries and samples from the GitHub repository into your Dynamic C installation directory.