There are big things afoot here and we'll soon have a Tier 1 connection to the internet.

I need to install a transparent proxy server just before we break out onto the internet.

There is a very good wiki regarding this, so I know exactly how to configure mikrotik to route all the http traffic to the transparent proxy.

My question is this:

Do I go with Linux and Squid or do I go with RouterOS 5.6?

What are the pros and cons of each?

Whichever operating system I choose, the machine itself will be running Corsair's new Force Sata3 120GB SSD to read and write the cache files to with probably 4GB of RAM.

Surely you go with linux and proxy, as thats a proxy. ROS is a router ?

Squid + Squidguard + shallaslist makes a good content filtering platform as well.