The late Bob Hoover believed that flywheel drive was the "right" way to convert a VW engine for aircraft use. If you have not read his blog, I highly recommend it, he had many years of experience with these little engines. Here are a couple examples:
Prop HubsCrank Basics IVMy opinion is that flywheel drive may be a bit cheaper, as it allows use of a stock crank, and possibly lighter than pulley drive. Many people building an engine now days will recommend only using new parts, and if you are buying a new crank, and new case, then parts are available to make the pulley drive very reliable as well. In the end the only real difference is which way do you want the prop to turn.
Personally, I will be building a flywheel drive engine, but I will also be using single port heads. So, what do I know?