It's actually more suitable for files that are frequently read but infrequently modified. Usually stuff in /usr of an operating system -- so if you're booting an OS off of a flash drive, you probably want to enable transparent compression for /, but not for /home. That way your boot time will be drastically reduced because you have to read less data from the slow flash cells and pass less data through the slow USB bus. But in /home you'll have lots of tiny files constantly being modified; GNOME config files; browser cache; and so on. For those, you're right that any change could affect more blocks than necessary and require a lot of rewrites... but I thought there were compression schemes that are "stable" in the sense that changing one block within the file doesn't change the entire file in a ripple effect? I remember reading that about maybe LZO or Speedy codec somewhere... but I doubt LZMA is stable because the focus is on compression ratio first.
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