How about using a format that has actually been designed to be a compressed read-only filesystem? Something like a SquashFS or cramfs disk image?

Only peripherally relevant, but also see Ratarmount: https://github.com/mxmlnkn/ratarmount

It lets you mount .tar files as a read only filesystem.

It’s cool because you basically get random access to the tarball without paying any decompression costs. (It builds an index saying exactly where so-and-so is for every file.)