Hmm, I haven't looked into that. A couple of thoughts pulled out of my ... head.
Those things aren't like an SSD in that
they don't have wear-leveling
(AFAIK) and will fail when the write access count gets high. How high, I don't know.
I'd be inclined to install the Ubuntu netbook remix, or something like it. It should be optimized (or can be) for running on a read-mostly memory like that. And have a relatively small image size. I run the Ubuntu netbook remix on my flash-based Acer Aspire One. I only have 8G of flash.
Another option would be to install a live CD image. (not an install from live CD, but the actual compressed read-only image itself, as is done on a pen drive) That doesn't write to the CF card at all when running. You can enable persistence so things like added packages and other changes made while running will actually get written.
A swap file is a no-no. So is XP, for that matter
 I can show you what the grub-legacy entry looks like to boot Casper from a copied live-CD image if you get to that point. Should be plenty of info on the Ubuntu forums though.
<message edited by zoltanthegypsy on Wednesday, February 08, 2012 8:07 AM>