As the servers are already strugling, have you wondered what serverside compression will cost in server side CPU consumption?
With the new upload limit of 5Mb this is a more serious issue. What could be a middle ground is to only server 1 Mb max pictures when the thumbs are used and leave the 5Mb pictures to a detail screen. The 1 Mb pictures would be saved. This would cost a lot of harddisk but it is easier to upgrade harddisks than processors.
On that subject, has a SAN ever been contemplated for wikimedia ?
Thanks. GerardM