I've used SD and even xD cards as hard drives in my A500, using a MechWare SCSI card reader, no problems. I stuck with CF because (theoretically) I think it's faster, but no reason you couldn't use something else. Only issue is, as you say, having a whole lot of adapters plugged into each other.
As an alternative, why not one that offers both CF and SD, you could use the CF as your primary, and then just pull out the SD when you want to transfer some files over? Something like one of these maybe:
http://www.gizfever.com/images/idetosdcf1.jpg?osCsid=prqreu7p807nf4bce9btbf4d23
