How do you format a 2 GB SD card to FAT32 (preferably with Disk Utility)?

If you're comfortable with using the Terminal, try this:

First, look at the partition table by running this command:

diskutil list

You should see something like this:

/dev/disk1
#:                       TYPE NAME                    SIZE       IDENTIFIER
0:      GUID_partition_scheme                        *16.0 GB    disk1
1:                        EFI                         209.7 MB   disk1s1
2:                  Apple_HFS Example                 15.7 GB    disk1s2

The partition we want to change is /dev/disk1.

We want to change the device to an MBR-formatted FAT32 partition. To do that, run this command:

sudo diskutil eraseDisk FAT32 NAME MBRFormat /dev/disk1

where NAME is the name you want to give to the disk.

As mentioned in the comments, you cannot put square brackets into the volume's name lest things mess up. To avoid having everything fail, simply ensure that there are no square brackets in the FAT32 volume's new name.

Note: The NAME can fail if not UPPERCASE in many cases.

sudo diskutil eraseDisk FAT32 [NAME] MBRFormat /dev/disk1

Where [NAME] must be written in CAPITAL letters; otherwise, this will not work.

As mentioned in the comments, ensure that you use a tool such as diskutil to check which disk you are formatting. In the example above, the disk /dev/disk1 is being formatted. After finding the desired partition through a method such as calling diskutil list (This command lists the partitions on the system. See other answer for details), replace dev/disk1 with the desired partition.

If you tried this:
$diskutil eraseDisk FAT32 MYDISKLABEL MBRFormat /dev/disk1

But receive this error:
FAT32 does not appear to be a valid file system format Use diskutil listFilesystems to view a list of supported file systems

Then this answer may help you.  But please note:

• This is an alternate solution for older Apple Mac versions where FAT32 as the filesystem type does NOT WORK as per the error above.  
• I am not sure which "older" versions produce the error, but it does occur in Snow Leopard 10.6.8 with diskutil version dated 15 May 2009.
• The error may occur from Mac OS Leopard 10.5 to Yosemite 10.10.  
• This solution is not relevant for newer Mac OS versions, perhaps El Capitan 10.11 and onwards.
• In the following examples, /dev/disk1 points to the SD card (device).  You need to determine what is the pointer to your device.
• I will not elaborate on every bit of information, just what changes need to be made to your command; e.g. you should know from other answers when to use sudo, how to identify your device, how to unmount your device, how to specify the label and how to verify that the disk is formatted correctly.
  

Solution:
Find the correct filesystem alias by listing all available options:

$diskutil listFilesystems

In the output table you will see that there are aliases defined by "(or) something" but there is no alias for the "FAT32" filesystem.  Thus, you must specify the case-insensitive full name "ms-dos fat32".

Command:
$diskutil eraseDisk "ms-dos fat32" mydisklabel MBRFormat /dev/disk1