I have done some testing and the fault appears to be with the compression process, as I am unable to unzip this particular .imz with 7-zip (reports 'not a valid archive').
I have backed up this USB key to .imz several times to different files to prove it was not a one-off issue with the image file - none of them can be opened with 7-zip.
I have successfully completed a compressed image backup and restore from a different smaller USB key, as well as confirming this .imz can be opened in 7-zip, so the process does work in general.
The 'problem' USB key is a 4GB model - is this perhaps too close to the 4GB filesize limitation in your compression module? Is there anything else you'd like me to test?