There is code in src/zfile.c to handle compressed files (.zip, .Z, .gz) and it tackles just about any kind of files used by UAE *except* HDFs. Patching the code to make it support these shouldn't be that much work, I guess? The performance on write operations could be a problem, though. Perhaps that is the reason why it hasn't been implemented.
WinUAE uses "zfile" for everything, including hardfiles. (but only smaller than 100M hardfiles are internally uncompressed to prevent running out of memory or decompression taking too long)
Performance won't change, "zfile" writes and reads goes directly to fread() and fwrite() as long as file is "real file" (not an archive, and writing to archives isn't supported)
WinUAE "zfile" also supports archives as a virtual harddrive, even archives inside archives inside archives etc are supported :)
This is also very fast because decompression happens on the fly, only files that are accessed are decompressed and cached for later use.
