Following what I have posted previously, I noticed that the kernel 2.6.34 has included the LZMA support for squashfs, it will be a matter of small delay, you will also see the squashfs-tools to OFFICIALLY include LZMA support. Actually squashfs using LZMA has existed a long while ago, and has been actively used by the embedded systems ( particularly OpenWRT ) so there is nothing so new about this.

Cloop also support LZMA compression.

As for me, LZMA is not particularly useful to me, because the compression takes too long. However, for a distro or a LiveCD, it is something particularly useful, meaning for the same amount of space ( say a CDROM ), you can squeeze in additional 10-20 % of additional programs into it.