UPDATE: Well, after I posted the above, I had 2 reboots within 15min of each other, then it would NOT boot, just stayed on the SAMSUNG boot page. I tried a hardware reset (vol down + camera button + power) and it seemed to format really quickly, then reboot. Still stuck on SAMSUNG screen.
I decided to pull the MicroSD and just restart and live with the internal 8GB, but no-go. the phone would boot to a very vanilla interface (all blue, no AT&T tiles at all) and under ABOUT would only show 17MB available, 7-10MB free. I tried clicking the restart on that screen, but no luck. I tried the 3-finger hard reset, no luck. I did this over 20 times, in all combinations I could think of. I even inserted another MicroSD card to see if it would try to config it, no luck. Either it hangs on the SAMSUNG screen or go to vanilla tiles menu and 17MB. At this time, it would also not sync, or even be recognized on the Windows PC I used to sync. And after 15min or so, weird things happened, like not even doing anything when clicking on ABOUT.
Anyway, I took the phone back to AT&T store and they swapped it with no problems, now I'm working fine on an 8GB phone. I'll wait until MS/Samsung figures out what's going on and updates the soft/firmware. No biggie. That's what we get for living on the edge I guess, hehe.
I'm getting a Kingston 32GB class 4 MicroSDHC to test when I try again. We'll see if that's better than the class 2 Sandisk.