I don't know the pros and cons of CF vs MMC, except that CF is larger and only CF allows you to unbrick the iLiad, see
How to unbrick (reflash, restore, etc) your iLiad.
Most 3rd party programs get installed on the same filesystem where its installer program was placed (some don't even need an installer, and so copying it to the filesystem "installs" it there). It is usual for them to end up in Programs and it is easiest to put new 3rd party packages there. Some apps can be installed in "internal" memory, but I always use my CF card because the easiest recovery procedure of all is to reboot after removing the CF card. If this fixes a problem, then you can use an external CF reader/writer (inexpensive and well worth having in reserve) to remove the offending files. I have never needed this for 3rd party packages by the way (they are usually tested enough to be safe), but I did need this when I installed some fonts - if they had been in internal memory I would have had to reflash to recover.