Nelson
The 128MByte free space that you are seeing is the OpenSDA's boot loader emulating a disk of this size (it is probably emulating such a large size to avoid the PC using FAT12 or FAT16, which would otherwise complicate the loader).
Therefore it is a meaningless size for practical purposes and can be ignored.
The ATMEL SPI Flash on the FRDM-KL25Z is connected to the OpenSDA's K20 (and not the KL25!!!!). I have no idea why it is there since it is not on any other such boards - again just ignore it since it is not of any use to developer's.
The KL25 on the FRDM-KL25Z has 128k of internal Flash, which is programmed when you drag code on to the loading disk.
Regards
Mark
Kinetis: http://www.utasker.com/kinetis.html
KL25: http://www.utasker.com/kinetis/FRDM-KL25Z.html / http://www.utasker.com/kinetis/TWR-KL25Z48M.html
For the complete "out-of-the-box" Kinetis experience and faster time to market