Actually, 7zip does not only compress significantly better and is a LOT faster than bzip (as far as decompression is concerned, compression is really painful, 2-3 times slower sometimes). LZMA, the algorithm used in 7zip is an optimized sliding window compressor, so unlike bzip, decompression does not need to do an awful lot except a few memmoves (no inverse transform calculation etc).
Since you compress once users only decompress, this sounds perfect. However, as stated before, the problem is not one of good technical stats, it is one of availability.
A lot of people will refuse to install a program to decompress the package of another program (and, somehow rightfully, too). To make matters worse, the Windows client coming with 7zip is quite ugly. Not that is doesn't work, it is just ugly.
However, speaking of LZMA and availability... what installer does code::blocks actually use?
NSIS, for example, has transparent support for LZMA built in.