While both are terrible options, I'd pick having Isiah as coach because he is a former all-time great point guard and finals MVP, so in theory, he should be able to offer something useful to players during a game and practice (although I'm not sure the Knicks roster from '06 to '08 would agree). Also, you can argue that he'd have a better chance at success as a coach if he wasn't stuck with players brought in by one of the worst GMs in NBA history (also him).
In terms of being a GM, I can't think of any possible upside to having Isiah back other than being excited rather than bummed out if there happens to be a prolonged NBA lockout.