You can use up to 2GB on SD and 8GB on memorystick at the same time without any problems, so what you're proposing will work just fine -- with the caveat that you should stick to "known" card brands.
I suspect people keep using SD because they don't have many other things that use memorysticks.
If you use cards bigger than those limits, the 505 will simply not read the stuff beyond the limits (i.e. only read the first 2GB of a 4GB SD card).
The drawback do putting a bunch of material on a card and using it in the Reader is that you have to wade through the full listing of books (for instance) ten titles at a time (ten is how many fit on a 'page' in the menu). The listing isn't hierarchical, it's flat. The 505 has added the ability to break the list down grouped by alphabet (i.e. A through D, etc.) but that only helps some, particularly when dealing with a full Gig of material.
Most folks seem to decide after using the Reader for a while, that they're fine with keeping only a few titles on it at a time.
I generally use it as a "Reading Shelf," putting things I intend to read on it as I get them and taking things off when I'm done with them, usually whenever I'm putting more stuff on anyway. Right now, I have 4 books that I've finished and about 6~8 on my "to read" list. I'll take the old ones off when I add more new stuff. I don't have to wade through a bunch of titles, and I've always got more "on tap" so I never run out.
Unless you have some particularly compelling reason to carry a butt-load of stuff, you may find that sort of approach might serve your needs better too.
The only other significant drawback to using memory cards is that they do cut into your battery life, since they get their power from the reader. That may or may not be an issue to you personally. It varies from brand to brand how much power they draw, but the memorysticks seem to draw less than the SDs and the fancier names generally draw less than the lesser known ones.
Hope that helps.
