This is similar to the Bug 115 description (https://sourceforge.net/p/freedos/bugs/115/), but occurs on real hardware with a single floppy drive, under FreeDOS 1.1 and FAT16.
With some number of floppy disks, a "format a: /u" finishes with this error:
DOS driver error (hex): 01
Description: unknown unit for driver
Program terminated.
[Error 129]
I can then take the same floppy, pop it into a Windows 98 PC, and it will format without error.
A possible additional clue: It seemed that when I had unformatted D: and E: partitions on another machine, "format a: /u" ALWAYS produced the error. But after I formatted those partitions, the error only occurred sometimes.
On the machine I'm working with at the moment, there is a single formatted partition -- no unformatted partitions -- and the problem appears intermittently.
I am also seeing this bug with FreeDOS format - my command format a: /u /v:untitled
I did try different values for STACKS=60 in c:\fdconfig.sys mainly because before I was getting a stack overflow error instead.
VER gives:
FreeCom version 0.85a - watcomc - XMS_Swap [Jul 10 2021 19:28:06]