It's quite kludgy (self referencing, etc; just put a few minutes writing it, nothing really elegant), but it does what you want if you're still interested in using gzip instead of zlib directly.

Basically, GzipWrap is a (very limited) file-like object that produces a gzipped file out of a given iterable (e.g., a file-like object, a list of strings, any generator...)

Of course, it produces binary so there was no sense in implementing "readline".

You should be able to expand it to cover other cases or to be used as an iterable object itself.

from gzip import GzipFile

class GzipWrap(object):
    # input is a filelike object that feeds the input
    def __init__(self, input, filename = None):
        self.input = input
        self.buffer = ''
        self.zipper = GzipFile(filename, mode = 'wb', fileobj = self)

    def read(self, size=-1):
        if (size < 0) or len(self.buffer) < size:
            for s in self.input:
                self.zipper.write(s)
                if size > 0 and len(self.buffer) >= size:
                    self.zipper.flush()
                    break
            else:
                self.zipper.close()
            if size < 0:
                ret = self.buffer
                self.buffer = ''
        else:
            ret, self.buffer = self.buffer[:size], self.buffer[size:]
        return ret

    def flush(self):
        pass

    def write(self, data):
        self.buffer += data

    def close(self):
        self.input.close()

The built in zlib library allows for using any filetype object, which includes text streams.

import os, pycurl, zlib
from cStringIO import StringIO
filename = '/path/to/super/large/file.img'
filesize = os.path.getsize(filename)

def progress(dl_left, dl_completed, ul_left, ul_completed):
    return (ul_completed/filesize)*100

def main():
    c = pycurl.Curl()
    c.setopt(c.URL, 'ftp://IP/save_as.img.gz')
    c.setopt(pycurl.NOPROGRESS, 0)
    c.setopt(pycurl.PROGRESSFUNCTION, progress)
    c.setopt(pycurl.UPLOAD, 1)
    c.setopt(pycurl.INFILESIZE, filesize)
    c.setopt(pycurl.USERPWD, 'user:passwd')
    with open(filename) as input:
        s = StringIO()
        c.setopt(pycurl.READFUNCTION, s.write(zlib.compress(input.readlines())))
        c.perform()
        c.close()

I have not tested this. See this SO question for additional info.