Thanks Andre!
I think that did the trick, changing block size from 256KB to 64KB.
I was able successfully initialize the tape drive media finally!
[Normal] From: MSM@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:13:35 AM Media session 2014/06/02-2 started. [Normal] From: MMA@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:13:35 AM STARTING Media Agent "HP DAT320 USB" [Normal] From: MSM@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:14:00 AM Data Protector foreign medium "f8269960:53875f72:3300:0001" found. Medium not found in the Data Protector Internal Database. Initialization allowed. [Normal] From: MMA@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:14:00 AM \\.\tape0 Initializing new medium: "Default DDS_5" [Normal] From: MSM@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:14:04 AM New medium added to pool: Default DDS MediumID: f8269960:538c94b8:4558:0001 Label: Default DDS_5 Location: [Normal] From: MMA@host.domain.com "HP DAT320 USB" Time: 6/2/2014 11:14:21 AM COMPLETED Media Agent "HP DAT320 USB" ============================================================================ 1 media out of 1 successfully initialized. ============================================================================