I did some testing, I am backing up the following:
Total = 168.2MB Un-Compressed / 211.3MB Tar'ed (including un-tared mysql)
I tar'ed the .com and the store so that I could preserve permissions, but it's pretty funny to notice that by doing that I actually increased the size of the files by 2% and 21% respectively. I didn't Tar the mysqldump because there wasn't a need to preserve permissions.
Anyways on to the results:
So all in all, it's not that much of a savings to use 7z over gzip for web site related backups. While I didn't time the compression or CPU usage, I know for a fact 7z is a resource hog, so it doesn't surprise me that Dreamhost doesn't have it enabled. I just had to ask.