For a product of 2009 this SD card reader is remarkably outdated. I've took it for granted at first and randomly popped in a 4GB SDHC filled with MP3s in subfolders only to get the "Unreadable" error. After trials and errors I found that this reader requires a tight specification on the card for it to work. So here it is:
1. The card must be 2GB or below;
2. The card must be old-style SD and not the newer SDHC;
3. The card must be formatted to the older FAT16, and not the newer FAT32 (note: if you're a Mac user you're out of luck. The only FAT format available in OS X disk utility is FAT32 (which is confusingly denoted as "FAT"). Get a SD format app or use Windows);
4. I heard brand matters but can't confirm all brands. (I CAN confirm that my Toshiba 2GB didn't work while my Sandisk 2GB did);
5. Filenames must be in English or the file won't be recognized;
6. Filenames must be shorter than a certain number of characters (which I don't know exactly, I renamed all my songs to the abcdefgh_##.mp3 formats);
7. I heard files can't be in subfolders but I also heard some had it to work even in folders (just put them all in root to be safe imo).
Conclusion: this SD card reader thingy is a piece of junk but it still kinda beats not having it at all.