There is a bad-sector-checking mechanism for floppy disks in version 7.0,
and it is that mechanism that is using up the disk space.
The "Re-verifying Format" message indicates that there was a problem during
the first format attempt (a media failure was found on the floppy disk).
Most floppy disks don't exhibit this behavior. Any that show the
"Re-verifying Format" message multiple times would be suspect. You would
most likely find more and more problem sectors with the zero pattern as the
system tries to keep the floppy disk usable.