Both a CF card and microSD card will work. The storage size (to an extent) should not matter, and you do not need to partition the storage ahead of time. If you need more help, have a look at this helpful guide.
This iPod is personally my favorite one, so I would say that it’s a great choice! However, keep in mind you will be limited to the games that come preinstalled on the device as 3rd party ones are no longer for sale.
Unfortunately there is currently no way to do this if you do not own the iPod Games on your iPod Nano. However, if you happen to own an iPod Video, you can install them on that.