If the disk is less than 504mb, any compatibility issues can be caused by the CF card itself. I've got a couple of 256MB cards that dont like working with the older laptops in my collection. One of my really old computers, the Packard Bell Legend 300, which is a 386 SX 20 will only work with 64MB CF cards, anything bigger fails to write correctly even after formatting.
Otherwise, with newer desktops and laptops (late 486 and pentium) that have LBA - logical block addressing, support they should be fine with 512MB to 8GB CF or SD cards. You can avoid having to use overlay software by using XT-IDE or other LBA BIOS extensions to use larger disks.
Overlay software is a big hassle if you want to use the disk in another computer. On my main 386, I just use 2x 256MB disks in a dual CF-card adapter to move files around. Since I can remove the D: drive and load files on it from my USB>CF adapter.