I got a couple of comments on my post about shrinking XAP sizes here. I haven't been able to follow up as quickly as I would have liked due to a couple of large projects I'm working on in addition to preparing for MIX'09.
The crux of the comments were to use a tool like ComponentOne XapOptimizer, which can be found here: http://labs.componentone.com/XapOptimizer/
I tested it on a couple of projects, and it seems to give me about the equivalent reduction in archive size as unzipping and rezipping the XAP package. It appears to be another great tool to add to your arsenal, although you may be able to squeeze out some additional space by optimizing the graphics in your application prior to utilizing XapOptimizer. Definitely worth checking out.
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