I think you are mixing here two different problems.
First of all the network compression is something new in this BETA and still has a few problems. But in general it is working correctly.

The message 'Unexpected end of ZLIB input stream' you are seeing in the network panel is actually not a real error.
More or less its a Bug in the Java implementation returning this error instead of telling me that the other side has closed the communication stream. For a not compressed connection you would instead get the error 'Connection closed from remote host'.
There is not much we can do about this and I dont have the feeling this is cased by a compression problem on our side.

The Exception you posted 'java.util.zip.DataFormatException: unknown compression method' is something completely different and not relegated to above problem. This indicates that we have received a message on the network which indicated to be compressed but could not be decompressed. Therefore the message could not be understand and will be dropped.
Even though this is not nice there is nothing to worry about, dropped messages are not unusual and do not cause the communication with a host to get disrupted.

Gregor

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