> If it can't find the start of the next block, the same thing will happen.
This has been addressed in the article. "Bzip2 is affected by this defect to a lesser extent; it contains two unprotected length fields in each block header. Gzip may be considered free from this defect because its only top-level unprotected length field (XLEN) can be validated using the LEN fields in the extra subfields. Lzip is free from this defect."
> Also, breaking up the data into blocks will decrease compression
This has been tested very thoroughly. Larger block sizes give rapidly diminishing marginal returns (man bzip2). Now, the largest you can go with bzip2 is 900KB.
This has been addressed in the article. "Bzip2 is affected by this defect to a lesser extent; it contains two unprotected length fields in each block header. Gzip may be considered free from this defect because its only top-level unprotected length field (XLEN) can be validated using the LEN fields in the extra subfields. Lzip is free from this defect."
> Also, breaking up the data into blocks will decrease compression
This has been tested very thoroughly. Larger block sizes give rapidly diminishing marginal returns (man bzip2). Now, the largest you can go with bzip2 is 900KB.