It all depends on what you want to do. If you have lots of little icon type pictures (like for buttons on a toolbar) you can use the ImageList control, or just use a resource file.
If you have few graphics of varying size, use the resource file. You can also load them in hidden Pictureboxes or image controls, if you do not have very many of them.

If your pictures are very large and you have a lot of them though, then keeping them seperate from your executable would be a very good idea. This way you only load them when you need them.

The compression thing you are using sounds like the best for lots of large graphics. You can speed it up by having the files uncompressed, but it will obviously take more space.

Shrog