If the cf0 file doesn't contain the line activate=1, you need to attempt to access the device for it to mount. (ie by typing cf0: in shell), even when the file is in devs/dosdrivers.
To troubleshoot further, the error you get when writing cf0: or info in shell is more telling than the lack of drive icon.
It's better to format on the amiga, not the pc. One less source of error. (And always use quick format!)
Size in itself is no factor regarding compatibility with compactflash.device/pcmcia. (it's TD64 compliant)