Looks like the Ethernet controller is causing the problem. It's chip select is pin 10 which is also SS for 328 Arduinos. In SdFat I set SS as an output and set it high. SD.h also is based on SdFat so it's O.K. In Fat16 I only make SS an output so it will be low.
To disable the Ethernet controller put his before the line with card.init().
pinMode(10, OUTPUT);
digitalWrite(10, HIGH);
I will add this to Fat16. The Ethernet shield didn't exist when I wrote Fat16 so I didn't make SS high when it was not chip select.