The microstepping setting is generally first limited by the output frequency of your parallel port. Using higher microstepping can help with reducing resonance problems, although those drivers have more advanced ways to deal with that so it's hard to say. Generally people don't use finer than 1/8th microstepping as going further can reduce performance, but if you can even use that will depend on the maximum frequency your parallel port will output and the feedrate you require.

For example, suppose you want a feedrate of 8m/min (sensible for cutting wood) with the 10mm pitch screw driven via a 1:1 ratio with a parallel port that can only output up to 25kHz (a lot will do more, but not all):
Screw angular speed: 8000/10=800rpm
Base frequency: 800/60*200=2667Hz
25000/2667Hz=9.4 ... so nearest is 1/8th microstepping with the above conditions.