Very cheap high-density flash is probably MLC (multi-level cell), some versions of which are quite unreliable: even reading one sector can corrupt others (though there are various ECC schemes to mitigate this "read disturbance"). Anyone producing flash drives in an IDE form-factor is probably aiming them at people who expect reliability and bit-error rates closer to those of traditional hard-drives; such devices will use SLC (single-level cell) flash.

Having said that, the price difference between MLC and SLC isn't itself enough to account for the $70/$1000 disparity, especially as 16GB in 2.5in isn't at all a high-density application.

Peter