That SD card should be fine, some folks have reported issues with larger than 2GB, but the only thing you're likely to run into is that the Reader will slow the card down.
As to getting texts onto the card, either approach you've mentioned will work fine. The drawback to the former is that you have to use the ConnSoft to transfer the files. The downside to the latter is that the page calculations will be done by the Reader (instead of your PC (via ConnSoft)), so it'll take time re-indexing the entire card every time you re-insert it.
You may find that you don't want to keep a lot of files on your Reader, or a memory card for that matter, since the Reader uses a flat file system -- it displays all the files on the card and in its memory in a single list, 10 at a time. So opening the last of your 256 files would require paging through 26 screens of file names.
Most of us have found that it's simpler to keep only the book we're currently reading, plus the next few we plan to read, and leave it at that. Of course, you'll have to decide what approach works best for you.
