AES-128 as compression function in Merkle-Damgard construction Using a compression function $f : A × A → A$. A basic version
given by:

$W_0 = IV$ 
$W_1 = f(W_0, m_1)$ 
$W_2 = f(W_1, m_2)$ 
... 
$W_n = f(W_{n-1}, m_n)$ 

$W_n$ is the output of the hash function, $m_1,m_2 . . . m_n$ is the message and $IV$ is a constant.

What would be the simplest way to implement AES-128 as the compression function? And would it be one way?

Excuse my ignorance, I am very new to the topic. My very wild stab in the dark is that AES-128 can be used in a way that feeds its own produced ciphertext blocks back into itself as the key.
This short thesis describes some of the basic ways in which to use the Merkle-Damgård construction based on block ciphers. The construction that is commonly used in MD5 and related constructions is in fact an instance of the Davies-Meyer construction. This could be directly applied to your construction (you have to add length padding and a length field to get a secure hash function of course) as follows: let $E_k(m)$ be a block cipher (like AES) with key $k$ and message block $m$, then we take $f(W_i) = E_{m_i}(W_{i-1}) \oplus W_{i-1}$ for $i=1,\ldots n$. This way we get a secure hash function, provided $E$ is a secure block cipher in the appropriate sense (essentially indistinguishable from a random permutation).