> I've come to a site which used server side compressed 
html 
> and compressed txt with gzip.  it is decoded real time on 
> my IE.  i tried setting MIME type 'html.gz -> text/html' 
> and 'txt.gz -> text/text' with no luck.

gz -> text/html should do the trick (dirty, yes, but I 
don't see any other ways)

>  the downloaded 
> file is simply garbage when opened on my IE.

Just tried and the file is saved as .html.gz, uncompressed 
(but IE might be unable to detect the type anyway)