"Can someone explain why and perhaps what types of devices are better suited to be loaded as modules?"
One advantage of loadable modules is that it saves memory. The modules are only loaded when they are needed. If they were built in then they would all be loaded at every boot.
Of the modules which you have a choice of being compiled into the kernel or being loaded the only ones that have to be compiled into the kernel are the ones necessary to access /lib/modules. If you have /lib/modules on a hard disk then you need to compile in the modules to access the hard disk, your hard disk chipset modules, and whichever filesystem you are using on the / partition (ext2, ext3, etc.)
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