A while ago I came across this post by John Resig pointing out that although packing reduces the file size, it takes longer to ultimately execute, due to the repeated unpacking process every time the script is used.
After reading this I started using the Yahoo YUI Compressor to minify all of my plug-ins, and it worked well, typically reducing file sizes by 70% or more. Looking through the jQuery 1.4 release notes I noticed that the jQuery team have switched to Google Closure Compiler. This really is a great tool because the code is compiled and rewritten, instead of just applying a regex filter. You can use in in your build process as a Java jar, or online using the Closure Compiler Service. In tests I have been getting a consistently higher compression ratio with Google Closure, and the added benefit that I know the code is syntactically correct.