Well i have graphical app for constructing iso files, plus it works with existing iso's. ext2 is not compressed right? I'm also not sure how one would go about backing up directory to ext2 image... would you need an entire ext2 partition to dd?

I would think compressed filesystem would be only alternative with benefits, but if i figure out other filesystem options like ext2 i could add support if it would be useful... i just can't think of a good use case.