I have a standard case A1200 w/1260 Blizzard 060/50MHz, SCSI controller add-on, 256mb Fast RAM, external CD-ROM & Zip drives and a CF to IDE adapter w/8gb CF card instead of a hard drive. I have thought about installing a slim CD/DVD Mac SuperDrive inside the A1200 case, instead of using the external CD-ROM drive, but have not yet started any work on that conversion.
I like the fact that I have the Phase5 SCSI controller and can add several devices if needed, but if I were in your place, I would opt for the buffered IDE splitter, switch from an internal hard drive to a cooler running, less power hungry CF to IDE adapter & card, and install an internal CD-ROM, or CDRW, or CDRW/DVD-ROM, or CDRW/DVD-R. There have been many people that have installed optical drives inside A1200 cases, both slim slot loading drives and standard laptop drives, so there are lots of examples and installation pictures to be found on the net. The Squirrel SCSI interface adapter is not any less messy looking than any other external optical drive cabling, so I would not use that as a reason to use SCSI instead of IDE. Plus it is very hard to find SCSI drives anymore, so you are much better off going the IDE route and using new(er) drives.