I have 3 Alix and I use them, two of them are with Compact Flash, one of them is with an IDE 2.5 hard drive.
I have on all Alix boards a FreeBSD minimal installed from ISO.
I also have a FreeBSD machine where I compile from ports and I create packages for my Alix boards.
I used picobsd and nanobsd in the past. Were useful for a 16MB CF, or 32 MB CF. Is not the case anymore.
If you really want you can build your own OS based on FreeBSD, then you could take boot sector, boot loader, a minimal kernel, minimal file sistem structure, binaries and libraries and config files and make it the way you like. If you want to do that, you can study build scripts they use in projects like
http://www.pfsense.org/ or
http://m0n0.ch/wall/
If you want to build a router OS that really will work forever on your CF, make it to boot from a read only medium and mount everything in memory (using memory device aka md). After boot process you can run a script that reads configuration from a config file to set up the system.
Place that config file on other partition that can be mounted also read-write so you could be able to write configs. Mounting the file system in memory makes it work only until next reboot, so you will not be able to install applications (to add new applications you must rebuild the image), those will be lost after reboot, also you have a limited amount of memory. Those are bad things. Good things are: your Compact Flash will last forever since almost no writes will be made to CF, only writes to config file will be made from time to time, only when you configure it. Also by mounting the file system in memory it makes possible to update your OS easely, by overwritting the Compact Flash, because after boot everything is in memory, nothing on CF.
In my opinion, for a home/small office use, the best way is to install a minimal FreeBSD from ISO distribution, then recompile kernel removing everything you do not need and mount partition (you will need only one partition) with "noatime". If you have lot of activity in your log files is better to disable logging and send your logs to a log machine if logs are important, so that way you will protect the CF card.
I use alix for almost 2 years, my CF cards are ok, I had no problem with it. I also used in the past CF for other dual core systems booting from a IDE to CF adapter, that are file server with Samba, and also I had no problem with them.
It all depends on time you have to spare.