We currently don't support compressed kernels.
For AMD/Alchemy boards we do, they work very well, and there isn't any reason it can't be supported on others. If you use boot code like u-boot, you would also get some pretty nice compressed kernel and initrd support (but the MIPS kernel doesn't have a very flexible implementation of initrd support). These features are very useful for embedded systems to maximize resource utilization, to provide field upgrade, and fallback recovery methods.
But if we were supporting it the limitation would depend on size of available memory and how it's used at boot time, that is the limit would depend on the exact system.
That's true. For just a compressed kernel, size is no problem. For initrd support, it's a little more of a challenge. I have a board with 128M of SDRAM and we regulary use 64M initrd images for software install and upgrade.
Thanks.
-- Dan