Doing a bit of research, I learned that a disk can be optimized "for performance" or "for quick removal". By default USB drives are optimized "for quick removal" which limits them to FAT filesystems. In order to have the choice for NTFS format:
- right click the USB drive
- go to the "Hardware" tab
- find the disk in the list and double click it
- go to the "Policies" tab
- select "Optimize for performance"
Now you should be able to format as NTFS and copy files larger than 4gb!