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I don't know much about it, but I'm fairly sure that compressing the Xorg data stream with lossy compression is going to mess it up completely and would require a complete overhaul of the protocol to make that work. VNC is indeed the more standard unix thing (insofar as remote GUIs can be considered standard on unix-likes) that applies lossy compression to the pictures being sent over.

> ... using gzip compression over the wire seems pretty stone-age.

Really? Probably half of all web servers on the Internet (using HTTP/1.1) use it.

> The proper solution is surely to use a modern lossy video-compression algorithm.

The X11 protocol doesn't send bitmaps so I'm not certain that a "lossy video-compression algorithm" is gonna have the effect you think it will.

x2go and xpra allow some lossy compression algorithms.