if you dont want to use a compressed fs you will need to change the way it is mounted. For this you will need to look at the outer layer: minirt.gz

loop mount a cd image ; cd /boot ; gzip the minirt.gz ; loop mount minirt ; see what you can do in there.

-- are there any reasons that I wouldn't want to do this?

due to the slow access of optical media it is probably faster to load less data and decompress it than to load uncompressed image.

cloop also provides indexing of the blocks so they can be accessed as required, that may be faster than an uncompressed ISO image.

those arguements concern your final image, not reducing your test cycle.

http://www.knoppix.net/wiki/Cloop#Cr...pressed_image:
adjusting the block size varies speed vs compresion ratio.

http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=164015
create_compressed_fs has been worked on recently , you may find it works faster if can install the lastest version.

Thanks for not doing the leg work yourself I found some useful info along the way.

HTH