If you can't copy files that are bigger than 2 or 4 GB, usually HD movies and such, on to your USB key, it's usually due to the file system the USB key is formatted to.
Unit allocation refers to the size of sections on the hard drive. Size of section is the smallest amount of data that can be read from hard drive.
The hard drive is divided into sections so that it has a way to find information that you put on it. When you format the hard drive, an Allocation Table is built (similar to spread sheet) that keeps track of what data is in each section.
Lets say you have a file that is 1024 bytes and you save it to your hard drive. Your hard drive will find the first available section and store the file data there. Even though the file is only 1024 bytes it will consume the entire 4096 byte section (you cannot put two files into the same section). So essentually you waste 3072 bytes of space.
So the smaller the allocation size you use, the less space will go to waste. But on the other hand your hard drive will run a little slower because file is usually stored in more than one section and in case of smaller allocations size you will need to read more sections to get the data.
I think 512KB is the most suitable for general usage of computer. I would only recommend larger size in case you plan storing a lot of big files (like movie files). In that case I would recommend 4K.
