I am using Uploadify on one of my client\'s web sites to allow them to upload a large amount of pictures at once to their photo gallery.
I am seeing issues lately.
You won't be able to compress JPG images much using zip or similar algorithms - they are already close to optimum in themselves. You'd have to resize them on client side. For that, see e.g.
Image resize before upload
jquery + flash: looking for plugin that resize images before upload
Image resizing client-side with javascript before upload to the server