The NSIS installer system supports the 7-Zip algorithm
(LZMA) and has an
overhead of 30-50kB. So that would be another option.
Inno Setup also supports the
LZMA algorithm like 7zip:
http://www.jrsoftware.org/isinfo.php
When using Inno Setup you should also download the graphical
interface ISTool:
http://www.istool.org/default.aspx
Regards,
Martin