Wow, you're taking a beating. My event in February 2010 was a success on the surface but a disaster once you did deeper. I took it so hard I was basically too sick to function(in addition to actually being sick, which didn't help!)
First, a note on Sandisk: Overall, they are my go-to provider for memory cards. I have a stack of PCMCIA storage cards for my MS-1 and 1 for my Alesis QS-8, and they all work fantastic. All my camera memmory cards are Sandisk, which is really at my insistence, plus I was getting 4GB cards for like $20 with a card reader 2 years ago when they were on sale, so I bought 8 of them before my wife took a 2 week vacation overseas with her family. Some of my USB flash drives at Sandisk. My only complaint about them is they sometimes cost too much!
I can guarantee that Sandisk won't be using that compression crap to squeeze more data onto a card or flash drive. Again, that sort of thing is done by cheap cards/drives and are typically sold through less than reputable retailers, typically of the Asian variety. One of my crew bought one of these, a 32-gig flash drive for like $30 a year ago, and that thing is unreliable as hell in addition to shoddy construction.
A note about the interface:
I can't say anything other than I don't know these units you're speaking of, but I suspect they are probably USB-based. I don't really trust USB all that much when it comes to high performance issues and concerns. USB is half-duplex, which makes it unsuitable for reading and writing at the same time. I don't think anyone would use USB for virtual memory or any sort of RAM-type storage becuase the devices are just flat out too slow and the interface is not suited to this sort of behavior(nor are memory sticks and data cards). Even a slower USB 1.1 interface at 11Mb/sec is sufficient for the throughput you're tryng to pass through it.
I think you might be hitting onto something though. You might be taxing the processor. As I'm ignorant on the units you mentioned and I'm try to respond somewhat quickly to provide "insight", I think you nailed it with your observation of playing 2 songs off 1 card and then doing additional searches. While the card can certainly support the throughput(regardless if you went MP3 or wav files, we're not talking bulk like video), then it sounds like either an interface issue(too slow) or processor issue. As the processors typically used are relatively inexpensive because we don't really need tons of CPU to get the tasks done, I think this might be the bottleneck.
I'm all for dedicated hardware whenever possible. While this is a computer in a box, we're not talking a laptop where we might be running things we don't necessarily need that could be hogging resources. So, you're already on the dedicated hardware route so theoretically, this should NOT be a issue for you.
Renting:
All I can say is that I own all my own gear and I in turn don't rent my gear. I don't have to deal with the joy of having my gear borrowed and/or trashed. Running into a neglect problem like you just shared, well, that's something I don't have to deal with. Still, I feel your pain.
Looking back, it appears you're constantly in the "doing the right thing" department.
Let me just share something, not that it makes any difference. We all know I hate MP3's. I made a 4-disc CD set of songs(all at CD quality). Now, it ended up all fitting onto a single DVD as far as raw data is concerned, with room left over. We're talking less than 100 songs in 3.7 gigs of space for full quality .wav files from my CD's(which was the source). I'm heading out today to actually buy some 32GIG sticks. I got the latest ProTools MPowered 8, and there's like 16+Gigs of stuff(Mac and PC, and my laptop does either/or per choice on boot) and some hard drives. With storage prices dropping like mad, it keeps getting cheaper every day.