What is the largest memory card I can use with this camera? Is 16g too large? I get a memory card error message when I put one in and I cannot format it.

The problem is that your camera is only compatible with SD cards, not SDHC cards. You bought a larger card for your older camera, not noticing that it was SDHC (or not knowing that it mattered). The new card doesn't work, not because it or the camera is broken, but because it's not compatible.

Cards up to 2Gb are generally SD.
Cards of 4Gb are generally SDHC.
Cards over 8Gb have to be SDHC.

(There are exceptions. Sometimes, manufacturers make 4Gb SDHC cards but some have errors; they disable half of the chip and sell it as 2Gb, but it's still SDHC. 4Gb cards are almost always SDHC because they're cheaper, but 4Gb SD cards do exist. They are so rare that I've even seen a guru on this site claim they don't. I did own one once, but it was very expensive and turned out to be so unreliable that I had to return it. I don't recommend looking for one, because of the problems.)

Your solution is to go find a 2Gb card, and be extra sure that it doesn't say "SDHC" on it.

According to the manual, the DCM-LC33 uses MMC and SD cards. Your 16GB card is actually an SDHC card and will not work. SD cards max out at 2GB.