I wish Google would take a note from Mozilla's add-on submission process and allow the source to be uploaded as a separate package. It's simple to test that the source package builds to match the compiled code and gives a more easily readable method for audting. It would also avoid this sort of nonsense.
I guess one could set up a local proxy server and load the PAC file into that, this seems to be a project that accomplishes it for the Chinese firewall: https://github.com/shadowsocks/shadowsocks-windows
UPDATE: our extension was restored in the WebStore after some letters, publications and discussions.
Minification of scripts in an extension can only have nefarious purposes. It isn't worth it in terms of bandwidth.
The 1 MB limit bug report gets on a certain nerve of mine, "I don't think it'd be fast so no need to change the limit just do these things that'll make it slower anyways".
There might be an easy way around all of this though, the problem is that the URLs used START encoded. If you just sourced the raw list and in the extension live ran it through https://github.com/pieroxy/lz-string/blob/master/libs/lz-str... to output the lz compressed pac file to disk (you'll need the filesystem write permission on the extension) and attach that lz-string library at the end and call it to decompress (similar to how you do now just not manual) it's probably a win-win.
I say win-win because on your side the lz compression will probably net a file ~10x smaller than what you have now at the same decode speed and on Google's side the URLs used are stored a form they can validate against.