There are certain pluses and minuses in both cases and you should make your decision, based on your company needs. We'll give you some hints in this subject and you should know then where to look further.
Legendary Strength of C/SIDE database - the history of Navision design reveals the primary goals to have its own proprietary database with the built-in features of database transaction integrity. As far as database is proprietary - Navision can manipulate its and tune it to serve its application. You can have users use the system heavily and suddenly shut down the power - when power is back on - Navision will be in the same good shap. The second goal was to provide robust graphical interface.
What is the volume of your data? - Navision was originally targeting mid-size and large corporations. Now, however, Microsoft is trying to target it to large corporations with sophisticated manufacturing. In this case you could expect huge volume of data - Microsoft SQL Server is better positioned to deal with that.
Do you have MS SQL Server Administrator? - Microsoft announces that MS SQL Server is moving to "zero-maintenance needed", but we would like to warn you - if you use Navision - you are more likely mid-size or large company. In this case you should have somebody to secure your database - in the case if you would like to deploy MSSQL Server
Do you plan on Crystal Reports? - you can always deploy C/ODBC to enable your C/SIDE database for Crystal Report, but MS SQL Server has such nice features, as SQL Views and Stored Procedures, which make SQL Server preferable platform
Do you need OLAP/Datawarehousing? - then SQL Server is the way to go. It has built in Analytical Server with OLAP cube creation and Excel data pivoting
Do you plan to expose Navision data to other applications? - Navision has tools to expose the data from C/SIDE database (C/ODBC, C/FRONT), but in the case of SQL Server you certainly have standard Microsoft technologies in your disposition
Good luck in database selection and if you have issues or concerns