It should work fine on SD cards as well, have used it for both. There should be a drop down menu box that let's you select which card you want to format or defrag.
I'm curious, if it isn't recognizing your SD card, is the Axim recognizing it? Maybe there is a problem with the slot or your card.
On an aside,if you are looking for something on a more permanent basis I recommend Total Commander. If I am correct, the pocket version is Freeware.
http://www.ghisler.com