If you can see a Recycler folder, you have enabled protected operating system files to be visible. To sort this, open Windows Explorer, click Tools > Folder Options > View, scroll down and ensure "Hide protected operating system files" is checked. This will then remove the recycler from view.
What happens when you try to scan the pen drive for viruses... does AVG produce an error? What happens when you try to format it...?
Baldbloke, August 2007