Eritrea is one of the most heavily militarized nations in the world. The ruling group is also pretty high on nationalistic frenzy (and has been about since before the country even existed) although this does not seem to alleviate the feelings of the average Eritreans, who are voting with their feet trying the risky way out of the place by the thousands, not rarely dying in the process.
Ethiopia is also a fairly repressive place, and it has plenty of internal fixtures awaiting to emerge (or re-emerge). Economic growth helps sweeping a lot of issues under the rug, but there is discontent.
A war in 2012 would be a nasty mess.
My understanding is that the Ethiopian military is both better and larger than Eritrea's, but Eritrea has some advanteges. Unlike Ethiopia, it has the luxury to focus exclusively on preparing a fight with the Ethiopians (one could say that the whole point of there being an Eritrea in the first place is to piss off Ethiopia anyway) and doing it. The government has an ability to mobilize the scarce national resource solely for war with Ethiopia that has probably few parallels anywhere after the Soviet Union around 1944.
There are probably large sections of Eritrean society that would dislike the government if even remotely allowed to do so, but I am under the impression that even there many would dislike Ethiopia more. So, war with Ethiopia is hardly a good way to bring to light the inherent flaws of the Eritrean system, while it may help catalyzing discontent in the relatively less subdued Ethiopian homefront.
Somalia would be thoroughly ignored by Eritrea is fighting broke out on the frontier. Ethiopia would also likely backpedal on its commitments there, probably making Kenya even more involved.