VS 2008 : Modal Form Hide Instead Of Close - Main Form Does Not Close

I have a main form that has a button with which a smaller form is shown. Think of the smaller form as the Find/Replace dialog in many applications, such as Notepad. It's important that the form is (what I believe is called) modal. What I mean is that it always stays on top of the main form. I ensure that by calling the Show method with "Me" as the owner argument. Whenever the small form loses focus it will not disappear into the background but stay visible (albeit out of focus). If you don't understand open up Notepad and have a look at the behavior of the Find/Replace dialog.

Here's my problem: instead of actually closing the form when the X is pressed, I want it to simply Hide itself, so its position and the state of any controls (checkboxes etc) is preserved automatically.To achieve this I simply cancel the FormClosing event and Hide it:

vb.net
Private Sub Form2_FormClosing(ByVal sender As System.Object, ByVal e As System.Windows.Forms.FormClosingEventArgs) Handles MyBase.FormClosing

[code]....

To show the form, I use the following (note the (Me) to make the main form the owner of the form; this ensures that it remains visible even when it is out of focus):

vb.net
Private Sub Button1_Click(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles Button1.Click
Form2.Show(Me)
End Sub

Now. When I run my project, and open the Form2 (small form), then hide it again (by 'closing' it), I can no longer close the main form (Form1)! It seems the main form cannot close when the small form still exists (albeit invisible)...?? When I don't use the Me argument in the Show method, I don't get the behavior I want. I know I can set the TopMost property to True but that will also cause it to become visible on top of all the other forms, even windows not part of my application.