There are quite a few people who would agree to throw it all in the ILB account. Here's a conversation over on the Diehards board
, in which there are a couple of linked papers on allocations to TIPS vs. nominal bonds, including these two:
Asset Allocation with Inflation-Protected Bonds
Diversification Benefits of Treasury Inflation Protected Securities: An Empirical Puzzle
David Swenson has recommended splitting bonds equally b/w nominal treasuries and TIPS.
IIRC, both CREF bond market + ILB did well in the 00-02 bear market, with the ILB account doing slightly better. TIPS funds like the ILB account also did better than TBM funds like CREF bond market and VBMFX in the recent credit crunch.
Also, it can probably be argued that one could hold both CREF bond market + ILB for behavioral reasons - so you don't kick yourself and do something stupid if one starts doing much better than the other.
Personally, I use both TIPS [via VIPSX in IRA] and a TBM [via VBMFX in 401(k)] fund b/c of limited 401(k) bond choices. I don't think I'd have a problem with using only TIPS and no nominal bonds, but I might change my mind when nominal high quality bonds start destroying TIPS.
From your first post, it looks like you're going to have a slightly-cola'd pension, so your inflation risk might is not as high as someone with a flat pension, and TIPS might not be as crucial to you as the person with the flat pension. If you think that you still have inflation risk, then I'd keep the TIPS, especially if your pension cola is capped at a low level. As for what % in each bond account, it's impossible to know now what will turn out to be the best, so 50/50 might not be a bad starting point, and 75 % ILB/ 50% BM wouldn't be bad either. Just pick something you think you'll be able to stick to.