1. only by reducing color depth (i.e. 8-bit graphics take up half as much space as 16-bit graphics). AGS stores backgrounds in its internal way, and you can't change that.
2. use MP3 or OGG for sound effects and music. Better still, for music use MIDI (and note that there is no feasible way of converting MP3 to MIDI, but quite a bunch of good MIDIs exist on the 'net)
3. note that an AGS game without extra files (e.g. no music.vox) can be run from inside a zipfile!
4. a CD can hold 650 Mb. I've yet to see an AGS game of that size