Thank you, @SomeJoe7777!It should not. The partitions can be any size.
Note that the car is case-sensitive when it comes to the volume name as well as the folder name for the TeslaCam partition. Make sure if you set it up again manually that you use the proper casing for the names otherwise the TeslaCam drive will not be recognized.
I triple-check file names and folder names every time. They are correct. I also created the USB partitions twice (prepare the stick and test, re-partition and re-test), and both times, it didn't work, and Tesla gave me X sign for the TeslaCam. Music worked.
Now, I tried this yesterday: re-partition the 256GB stick to 119GB and 128GB, instead of 128GB and 119GB, and made 119GB partition for TeslaCam. Magically this time, it worked!
Didn't work: 128GB TeslaCam + 119GB TeslaMusic, both FAT32
Worked: 119GB TeslaCam + 128GB TeslaMusic, both FAT32
I will test the TeslaCam, including Sentry, for a few more days and report back.
My current hypothesis: the TeslaCam partition should be the smallest in the disk.