MCX can only save the DDS textures the way FS/P3D expects them at the moment. What you could do is use another format like PNG for X-Plane. Or else you need to flip them in an external painting tool, can be any that support DDS.
Any reduction in the file size will also increase the compression and thus reduce the quality.
Which compression level you use now? 85 is typically seen as a good balance between size and quality.
Only if you have a lot of overlapping bgl files you might be able to save space by combining them.
I think the problem is that Jon is using an older version of the DLL files, these are from before the update that adds P3D v4.4 support. Jon, I think you need to check that the the reading of the object actually returned a non-empty scenery, before passing it to the footprint generator...