Collaborative Algo Design

My infinite compression algorithm seems to work but the
decompression results in garbage files, there are possible errors in source.
Since i don't want to waste more time(it get on my nerves to debug complex algos all day) with it(i have to work on my wiki engine and my game projects such as velox at astrum,sakura and vitae arcanum, which all are more fun to code, without all these soulless math tricks and bithacking).
Here is the source(its very alpha and it only does 1 level bitmap):
http://pastebin.com/FTuKvz1B
Note this is not the range compressor i discussed before,
it a single byte compressor i invented few days ago.
The old thread about it is at http://dis.4chan.org/read/prog/1318181159

I tried to compress Million Digits to a single byte using recursive merge& compress, result: after 6 iterations the size stays at 3 bytes(though files omit offset of start of bitmap and iterations,if with offset minimum size will be 4+1=5 bytes,+amount of iterations=6 bytes).  Still can't decode anything.