Compressed kernels seem to be fairly high on everybody's list. Due to size limits of some boatloaders and flash memory being always too small and too expensive I guess there would also be some interest in bzip2 support.
Interesting thought. I compressed the binary image using bzip2 instead of gzip, found it was only about 7% smaller (approximately 60K bytes). To this, we have to add the trade off that the kernel already contains too many versions of a readily available zlib, and the attached initrd is also a gzip file. Five years ago we used to be concerned about a few bytes here and there, which prompted the interest in compressed kernels, but today the embedded systems I'm working with have lots of flash memory. It seems product development cost to add a little more flash is winning over spending the engineering time to squeeze those last few bytes.
I don't think I'll spend my time doing it, but the process of creating the compressed image and the calls to the uncompress functions are very clear if someone else wants to do it :-)
Thanks.
-- Dan