1) NOW WORKS WITH WEBRESOURCE.AXD! There is a feature (bug?) in WebResource.axd that prevents HttpModules from modifying the output stream for WebResource.axd. I disabled it! ; ) IMHO, a feature that breaks things is not a feature, but I can understand why they did what they did. They are hoping to fix this in .NET Framework 2.0 SP1.
This ASP.NET HTTP Compression module fixes both the WebResource.axd issue and the Response.End issue. Please make sure to test and send me feedback.
2) Update code to detect the WebResource.axd handler. Instead of checking the Url, I now check CurrentHandler is AssemblyResourceLoader.