two points:

reread the question i think you missed the last two requirements:

reformat each uncompressed file using a proprietary program over which I have no control

recompress each file so that our disk doesn't run out of space

/tmp is not a caching filesystem in solaris it is a direct drop to RAM/SWAP -- you fill it and the RAM is starved and swap will start thrashing (read *bad*). Solaris agressivly caches on other partitions which will not starve memory.

-Waswas