Towel! I think it's much better, give more control and feel of the racket. Only downside to towel is that it get stinky fast as well as dirty. My suguestion to to make home made ones(out of soft towel) and when they stink up or get real dirty just put them through the washer.
read: http://www.badmintonforum.com/vb/announcement.php?s=&forumid=3 AND http://www.badmintonforum.com/vb/showthread.php?s=&threadid=6803&highlight=towel+grip AND http://www.badmintonforum.com/vb/showthread.php?s=&threadid=6854&highlight=towel+grip thead locked.