Is it possible to erase and reformat an iPhone to be act as a USB? I've seen many apps that can store data and then you can access it, but is it possible to actually reformat the entire iPhone to behave as a USB?
Not that I know of, no. However, there is an app called Documents Pro ($5 US, and definitely worth it) that would do something similar to what you want. The difference is that it connects via WiFi as a network drive as opposed to connecting via USB.