No, it doesn't. That's the problem. Here's what I do:
1. Format memory stick
2. Start GTA
3. Play to first safe house.
4. Enter house, wait out instructions ref clothes and savegame
5. Do NOT change clothes, go directly to icon displaying "Backup #1" text
6. Icon disappears, instructions appear again.
7. Exit game via "home" button.
8. Go to "Saved Data Utility", push "X", message is "There is no data"
9. Go to "Memory Stick", shows "Free Space 30MB" push "X", message is "There are no games"
Thanks
Charlie
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