For CFW; newer versions generally means more functionality and support. For instance, one of the latest CFWs added support for multi-disk PSX games, which is not supported by older CFWs. The backshot is that when new CFWs come out, they're usually a bit buggy, so it's a good idea to wait a little so the developers can add bugfixes in updates.
Kinda like Windows Vista. ^^
I use 3.80 M33-5. (Translation: Team M33's homebrew-enabled edition of Sony's 3.80-firmware. The "-5" means it's update #5, so it's been worked on a while.)
Right now, the newest firmware from Sony is 3.90, and M33 has already released their own edition "3.90 M33". But it's still the first release, so I'd wait a while until maybe "3.90 M33-2" comes out.
You can find them at http://www.dark-alex.org
I'm no expert, but I think MicroSD and SD aren't what you're looking for. The PSP uses "Pro Duo" cards. (Feel free to correct me on this one, anyone.)
Stuffed crust rocks.
EDIT: I was generally impressed with the SNES emulator; it runs well especially on Slim with Frameskip set to 1. If there are specific games you need to know about, and the whole purchase of PSP is riding on it, I suppose I can check them out.