For IIS7.5, an alternate method to enable compression is to run the following commands in a terminal:
To enable compression for both dynamic and static content:
C:\Windows\System32\Inetsrv\Appcmd.exe set config -section:urlCompression -doStaticCompression:true -doDynamicCompression:true
To set the compression level to 7 for dynamic, and 9 for static content:
C:\Windows\System32\Inetsrv\Appcmd.exe set config -section:httpCompression -[name='gzip'].staticCompressionLevel:9 -[name='gzip'].dynamicCompressionLevel:7