Thanks for all comments so far, it's good to have so much feedback and there were good questions.
So let's try to clarify some things.
When updating from old (let's call it TORFU) to new firmware (Arizona) we are trying to make the transition as smooth as possible.
First off, we will make sure your installed TORFU is beyond a certain release number. Older TORFU will need first to update to something more recent.
Then you have the usual options for installing:
- using the build-in updater in TORFU and either fetching from network, or by selecting in the TORFU file browser an Arizona upk package you put in some media.
- putting the Arizona upk package on a card, and rebooting the OSD (so called "emergency upgrade" mode)
All these options will require you to have the CF card in the slot to be able to upgrade.
The upgrade process will format the CF card and will use it for the Arizona firmware's own purposes.
You are not supposed to mess with the CF card anymore after that, or the whole thing may stop functioning.
Once you have updated to Arizona, if you ever try to boot without the CF card, or remove the CF card while running, you will get a message on screen telling you to put it back, and you will need to reboot.
Now, some of you like your CF cards, or even better your microdrives. I can understand that.
However, initially we will not allow any other use of the CF card, to reduce complexity. There are already plenty of things that can go wrong.
Once the Arizona software gets more mature, we plan to see if possible to do any of the following:
1) create only a partition large enough for our purposes on the card, and let you repartition and use the rest as you please
2) allow you to decide which card slot Arizona will use
3) you tell us

(but i don't think the USB multi-card reader is an option, due to the USB issues and big number of brand/models/behaviours of these things)
Actually i bet most of the people in here would be already able to use some partition resizing tool on the post-update CF card to claim back most of the space. You just have to do it all over again after each upgrade, but it's a small price, i suppose.
Speaking of price, I'm not working in operations dept myself, but last I heard the CF card we send out to current OSD owners will actually be free (as in beer). Yeah, we love you that much

But ask Joe to be 100% sure.
Hope this helps clarify a bit.
Cheers,
--
nero