Lossless compression (ZIP, 7z) can reduce a 4.7 GB PS2 ISO to ~2 GB. "Highly compressed" (under 200 MB) would require stripping 95% of game data (audio, textures, missions). The result would be an unplayable tech demo.
Open PPSSPP and navigate to the folder where you extracted the file. Grant the app permission to access that folder. Click the game icon to launch the mod. Better Alternatives for PSP gta san andreas psp rom highly compressed best