Why do the offline folders on NTFS that I've compressed keep losing their compression?

A. Manually compressing the offline files cache (the %SystemRoot%CSC folder) isn't supported. The files you compress will be compressed, but new files will not be compressed, and existing compressed files will lose their compression after synchronization.

To ensure that a deadlock doesn't occur, Windows 2000 writes files in uncompressed format even when the folder is marked for compression. Marking the Client Side Caching (CSC) folder for compression and leaving it that way can cause a variety of complications, ranging from caching update problems to Win2K not responding (hanging) while you attempt to access files residing within the cache. The upshot is that you shouldn't compress the offline files cache (the CSC folder).