What format is suggested? Whats the pros and cons of those 2? I have seen 1 MDF format but I have only came across only one game with that.
From what I have seen in Lakka OS, is that when using CCD games they are not in the database and I had to manually scan them and add the thumbnails manually too.
BIN/CUE and compressed CHD always work with the db scanner, at least for me.
For the DB scanner to work, I think the file hashes must match the ones on TOSEC or redump.org. If you dump your own CD (assuming they are in good condition, without physical scratches that prevents a proper dump) your dumped images hashes should match the ones in TOSEC or redump.org.
If you obtained your images from an old USB HDD that strangely appeared on your desk full of images 
then again, you must check if the files hashes of those images match the ones on TOSEC or redump.org for the scanner to work. For a rule of thumb, if your images are verified to be good, the scanner will work and the cores will likely work without strange CD READ errors.
Also, for the games protected with LibCrypt, a .SBI file is needed for the cores to work, but I think (I’m not sure) that SubChannel Copy Protection method is mostly find it on PAL games.