In cost per-megabyte, Compact Flash and a microdrive are pretty similar, but on a per-unit basis the CF has an obvious edge. Since you don't currently have anything else which uses either, the ability to purchase two or three CFs for less than the cost of one microdrive might be an advantage -- you could use one for experimenting with different software, for example, and another "stable" CF for "serious" work, or one for yourself and one for when others will be using the IA-1.
The other side of the equation is size, of course; if you want Windows, or a fairly robust Linux distro, 128 megs may not be enough. But for most uses, I'd go with the CF.
Liberator of Magic Smoke