What is the minimum allocation unit when recording...

About 2 seconds for "SP" mode audio, 4 seconds for "SP" monaural, 4 seconds for "LP2" and 8 seconds for "LP4" mode audio. Audio information on Minidisc is organized in cluster units, which constitute the minimum unit for write or over-write of data to the disc. Each cluster contains 32 sectors of audio data, 3 "link sectors", and 1 sector of "sub data". Each sector is 2332 bytes, and 2 sectors are grouped together into a 4664 byte block holding 11 sound groups. Each sound group is 424 bytes and contains 11.6 msec of SP stereo data or 23.2 ms of SP mono data (LP2 and LP4 are double and quadruple the SP audio duration). A cluster is then 74624 bytes (32*2332), containing 176 sound groups (74624/424), for 2.0416 seconds of stereo sound (176*11.6) or 4.0832 seconds of monaural. See also the section on Prerecorded vs. recordable disc layout.
The sound group (1/86th second) constitutes the finest resolution at which the audio stream can be edited. Older consumer grade MD decks have an edit positioning accuracy of approx. 60 msec (5 sound groups) but many modern machines allow edit positioning in units of a single sound group (11.6ms).