Zipping will not compress data that much, not even close.
A nandroid will store /boot, /system and /data, but not /sdcard. So it will back up apps and their internal data, but not anything they store on /sdcard (or the external SD card, if you have one), and will not back up media or other files stored there. This is nothing to do with setting TWRP up right, it just doesn't do that.
For its intended purpose this is fine, because a factory reset will also not normally wipe /sdcard.