cd to your kernel source and grep your .config file.
Code:
grep CONFIG_HAVE_KERNEL .config
tells you what capability for dealing with compression is built in to the kernel
Code:
grep CONFIG_KERNEL .config
tells you how it is stored
It needs the capability to unzip how it is stored, but 'make allnoconfig' doesn't think of things like that. I feel sure that option is for developers and embedded, not ordinary mortals.