Don' t try to mount the diskette. That makes no sense until you have a file system. Formatting operates on the disk device directly.
fdformat /dev/fd0
should do it. On most systems this command can determine what the disk type is and choose the correct parameters automatically. Otherwise, use
fdformat /dev/fd0H1440
...for the 1.44MB floppy,
fdformat /dev/fd0h1200
...for the 1.2 MB floppy, or
fdformat /dev/fd0D720
...for the 720K floppy.
If the diskette is already formatted (DOS or otherwise) you don't have to do it again. Formatting is low-level only and independent of creating a file system.
mkfs /dev/fd0
Same deal. It should automatically choose the ext2 file system on the floppy; otherwise, you can specify it. Also try one of these alternate forms, especially if yours is a stripped-down system.
mkfs -t ext2 /dev/fd0
mke2fs /dev/fd0
mkfs.ext2 /dev/fd0
This will create an ext2 file system. Of course if a newer file system were to replace ext2, mkfs would probably choose that one for you.