OK, i've played around with what PhysFS stuff for the first time. Most things are working great, but there are a few strange effects.
First, i'd like to answer MiniMax's question about "what the fuzz is about". ZIP compression is much more efficient than NT's built-in transparent compression. Example: X-Wing CD. The files on the CD use 68,2 MB (71.549.748 Bytes). With NT's compression, this decreases to 57,6 MB (60.491.440 Bytes). The same files zipped use up 38,5 MB (39.419.137 Bytes). I'm pretty sure this could be reduced further by using 7-zip compression. You can easily see the difference. And this doesn't even take defragmentation or "partially used disk blocks" into consideration. One large file is much easier to handle than many small ones, this is true for all FS's.
Another advantage of PhysFS is the fact that you can mount archives from read-only media. This makes it possible to store games on DVD or CD, and mount the ZIP files from there. New or changed files will be redirected to a local directory. It's also easy to maintain a "pristine" version of an installed game. You just install the game and zip it up without configuring it. After that, you configure the game, embed DOS32/A into the executables, etc. - the archive will be untouched, all configs or changed files will be written to the local hd. If you want to go back to the original version, just delete or move the local files.
If PhysFS would be added to official DOSBox, another great advantage would be multi-platform, of course (; .
One thing that's a bit strange is the way PhysFS handles archives with more than one directory in them. For example, i like to put my games in a "c:\games\<name>" directory. An archive containing two directories won't display files correctly on a "dir" command (after the first one or two dir levels), even though the files seem to be there (i can execute them etc.). This looks like a small bug.
I'll do some more testing, especially with demanding and large games. If PhysFS works as good as it is now, i'm gonna switch my DOS games collection to using PhysFS. There's no need to waste resources on uncompressed files when there's a good alternative IMO.
It'd be nice if the DOSBox devs would consider including PhysFS in the official DOSBox build. Gulikoza should be quite familiar with the code, so it should be possible to include it in a "clean" way.