Hi Steve,
i think ist better to use the client cpu for that task to save disk space
and cpu at the tsm server. 
That also reduces networkload for backup and restore.
We use compression at the client on all tsm clients including TDP for SQL
for a long time.
The load during backuptime is typical low, so we can use the cpu for that
task without problems.
We are quite satisfied with the performance of that solution.

Regards 
Stefan Holzwarth