Is it good to have SQL CE with small application server where clients very often read and write to the database? I am not aware of any cons so far. Also, does the connection pooling work here?
It's only really useful if the client is disconnected, ie not a permanently connected environment. If they aren't ever disconnected, then the added complexity of the local storage is arguably too much overhead for small applications.
SQL CE does not implement a connection pool – it's designed to be lightweight and fast, so connections should create and connect fairly fast anyway.