1) I don't recall there being a 128meg AIM-CUE flash. 512meg and 1gig as far as I know were only ones. 512meg was replaced with the 1gig awhile back. Maybe whoever you bought it from did not know if it worked or not, etc and just slapped a cisco 128meg flash in it for a router, etc.
2) I have seen that to when trying different flashes from other AIM-CUE in other AIM-CUEs. Did not ever get an answer why from TAC.
You can try loading the cue-installer via TFTP (break into the boot helper on CUE bootup) and seeing if you can load the software via the boot helper if it recognizes the 1 gig flash from there you have.
If not, from my experiences, it has been RMA of both the AIM-CUE and flash. I've done both ever since just RMA'ing the flash one time and putting new flash in and getting the signature error that no one was ever able to figure out at TAC. On that one, TAC also turned around and RMA'd out a new AIM-CUE after just the flash.
Hope this is helpful for you.