CDs are better than thumb drive in more ways than thumb drives are better than CDs. Personally, I use CD-RW instead of a thumb drive, though it seems that thumb drives are more commonly used. I am going to attempt to list down all the similarities/differences and advantages/disadvantages of each type of storage.
Similarities between a CD-RW and a thumb drive.
1) Both can store data
2) Both can be rewritten over and over again
3) Both are commonly available
4) No need power to maintain data
Differences
Advantages of a CD-RW
1) Cheaper. CD-RW cost only a few cents each, while even the cheapest thumb drives costs 10-30 of dollars with expensive ones well over a hundred.
2) Flatter. While the thumb drive is much smaller in width, the CD-RW is much flatter making it more practical to slot in between files and documents than the thumb drive.
3) Lower price-per-megabyte. A CD-RW with 650 or 700mb of space will cost less than a dollar but a thumb drive of equivalent storage will cost 40-50+ (as of 22/th December 2005).
4) CD-RW writes data faster than a USB 2.0 Fullspeed thumb drive. A typical 12x burner can do 1800kbs or 1.8 million bytes per second. However, a USB 2.0 Fullspeed thumb drive can only do 1.4MiBs (wikipedia 2005) or 1.468 million bytes per second only.
5) A CD-RW needs a writer to work while a thumb drive needs a USB card to work. Most computers nowadays come with both a CD writer and a USB card, so there is no additional cost in using a CD-RW.
6) CD-RW can be read on some CD players.
7) Easily accessible as it is commonly placed in the front of the computer 
CD-RW fits in the CD tray easily due to its large surface area
Disadvantages of a CD-RW
1) It cannot fit nicely into your pocket like your thumb drive.
2) It has large surface area making it easy to be scratched.
3) With its casing, it’s a few grams heavier than a thumb drive.
4) Limited to 650mb or 700mb, it cannot store a single large file, for example a video file of 2 GB.
Advantages of the thumb drive.
1) Can fit nicely into your pocket
2) Durable USB port not vulnerable to scratches.
3) Insignificantly lighter by a few grams than a CD-RW with casing
4) Available in large capacity for example 2/4/8 GB to store large files like video files.
5) A USB 2.0 Highspeed thumb drive writes faster than a CD-RW; it can do 57MiBs (wikipedia 2005) 59.77 million bytes per second.
6) Can be used on older computers since most old computers have a USB port instead of a CD writer (old here refers to 1998-2005)
Disadvantages of the thumb drive
1) A USB 2.0 Highspeed thumb drive is uncommon (as of 22th Decmber 2005)
2) The cheapest thumb drive cost much more than th most expensive CD-RW
3) Thicker than a CD-RW making it difficult to slot between documents
4) Higher price-per-megabyte. (see Advantages of CD-RW point 3)
5) Use of thumb drives on older computers requires device drivers unlike CD-RW
6) Many old computers without a USB port can read data written by CD-RW because most old computers have at least a CD-ROM drive (old here refers to 1997 and before). For example, I can send data from my Windows XP computer to my old Windows 3.1 via a CD but not via a thumb drive because my Windows 3.1 computer has no USB port.
7) Few single files in practical usage are larger than 650/700mb. Most documents files are less than 30kb while JPEG images from cameras are around 4mb (8mp) and RAW images from cameras are rarely over 20mb (16mp Canon 1Ds Mark 2) (dpreview, 2005). The only files that might exceed 650/700mb are videos and programs. For videos, DVD is more commonly used as DVD can be played on home theatre systems. For programs, companies sell you in CD format and it’s illegal to copy them anyway. While audio CDs can be played on some music players, there is no way you can play music in your thumb drive via a CD player.
9) USB ports can get quite congested. Typical computers have 6-8 or less USB ports. It might occupy: 1) Wireless mouse adapter 2) Wireless keyboard adapter 3) Scanner 4) Printer 5) ADSL Modem 6) Occasionally your camera 7) Occasionally your MP3 player 8 ) Perhaps a Bluetooth port 9) Perhaps a infra-red port etc. Sometimes, it might leave little space for you to put in your thumb drive. Fortunately this is quite unlikely.
9) What’s more likely to happen is that you have no USB port in the front of the computer and every time you have to access it, you have to bend your back to the back (I love puns…) of the CPU to connect it to the computer.
10) The USB port is so small that you have to align your thumb drive accurately before it can fit in. CD-RWs can be placed into the CD tray easily.
I feel that the advantages of CD-RW outweigh its own disadvantages and the advantages of thumb drives. I found out the only reasons you should use thumb drive is:
1) You have no CD writer. (Most valid point) Or it might be damaged.
2) You like to keep data in your pocket. (Most common answer when I ask why use a thumb drive instead of a CD)
3) You are rich; and rich enough to get a thumb drive with USB Highspeed 2.0.
4) You do video editing but for some reason, you don’t use DV tapes or DVDs or CDs. Or simply you keep single large files.
5) You always drop your CDs face down.
6) You are sensitive to weight and cannot tolerate CDs with their casing weighing a few grams heavier.
7) The USB port is located at a more convenient location than your CD writer.
Wikipedia (2005). [Online] Available: http://en.wikipedia.org/wiki/USB_2.0(Accessed: 22 December 2005)
Dpreview (2005). [Online] Available: http://www.dpreview.com/reviews/canoneos1dsmkii/page12.asp
(Accessed: 22 December 2005)
