A customer recently asked whether he can use NTFS compression on volumes or folders where replicated files are stored. The answer is yes, you can compress replicated content using NTFS compression, but we recommend against using NTFS compression on the Jet database for reasons described in KB article 318116. So avoid using NTFS compression on the following location: <volume>:\System Volume Information\dfsr\database_<volumeguid>. For example, if you’re replicating files on the C:\ volume, the Jet database location would be c:\System Volume Information\dfsr\database_D40C_B2CC_CB2_A8BE.

--Jill