Plextor CD drives offer a feature called GigaRec which allows high capacity storage up to 1 GB on a 700 MB CD disc. They do this by reducing the size of the "pits" when wrtiting the CD.
Also, data CDs can be mastered to have repeated data be linked to two separate locations in the TOC, so that you can have two "files" that both point to the exact same data on the disc. MS uses this for some of the Office discs so that when you copy the files file-by-file you end up with far more than 650-700 MB.
Finally in response to you codec question. Apple Lossless Audio Codec gets you close, depending on the type of content (music/voice/etc) it tends to be around 1/2 of the original AIFF size. Otherwise you could just use standard codecs (MP3 or AAC) at ~320 kbps to get to roughly 1/4 of the uncompressed size.
B