Installing a surface switch
Install the switch on the hot wire for several reasons.  While installing on the neutral wire would likely work, realize that in 110v installations, the neutral and the ground are effectively the same wire (the neutral line connects to the ground within the breaker panel so you only get one phase of the 220v or 110v).  So switching off the neutral is akin to switching off a ground wire.  It also means that anyone replacing a bulb with the light switch turned off is risking frying themselves if they contact the hot contact and any ground.  And finally, any electrician working behind you will be confused at best or mis-wire things at worst.

As for the switch itself not being grounded, that never made much sense to me.  The only thing I believe you are grounding are the screws and metal tabs that hold the switch in place.