"Btw, is there a tutorial for just a way of making a cd with transparent compression and either IsoLinux or bootscriptor or even cd shell?"
If you want to create a bootable CD witha command shell then I suggest that you take a look at LifeBoat:
"Currently, I believe bcdw is the only bootloader that supports images over 2.88mb..."
Use isolinux. It does not mess with trying to create boot floppy images on a CD. Look at the mkisofs command within the LifeBoat script to see how to do this.
"The image it creates is 111mb, and the directory onthe hard drive takes up 111mb......
Am I doing something wrong?"
Probably not, the iso image is a file, not a directory.
"Also, how does one compress certain files and leave certain other files uncompressed? Taking a look at mkisofs, there is no way of doing this, to my knowlwedge (for leaving just the boot-files uncompressed while compressing everything else...)..."
Do not use mkisofs to compress anything. Compress the files that you want compressed as a separate step before you run mkisofs.