I'm confused. Do you have problems with a 1GB 1.8 inch IBM Microdrive or a CF card? Or both? As I read it, you are having install recognition issues on 2 devices that did not exist at the time the KS 2.05 and AmigaOS 2 were developed and by my memory were improved to make better use of both older and newer devices with version 3 of both with the software improved over the next few years to upgrade not only the SCSI.device driver but also the HDToolbox.
From the above response it sounds like you now have the drive or CF card installed but are having transfer errors? Is this a very old CF card or a newer one? While old IDE drives had sector partition limitations, these issues should not transfer to solid state devices, especially new ones. I am fairly sure a somewhat modern Microdrive would lack these limitations entirely.