indeed i don't see this feature to be all that super hot..
highly compresable files are usually small(ish) text/html/image image. and those don't take that long to transfer..chances are it takes more time to setup transfer(port/pasv/stor/etc) than to transfer file itself
it will not do anything for big precompressed files that takes long time to transfer
there is somewhat similar implementation for dir listing, server keeps complete dirlist in .gz .bz .tag whatever format for quicker retrieval.
you can check it out at
ftp://ftp.uu.net
i'm not against MODE Z, but don't get your hopes up for 4x transfer speeds