Opening a pipe both from and to "gzip -dc" ? Perhaps if you are doing line-mode input from the compressed source, that's the problem:

while (<WHEREEVERTHECOMPRESSEDDATAIS>) {
    # $_ could be potentially huge, if it doesn't 
    # contain a newline somewhere soon
    print GZIP_IN;
}
[download]

See read() or sysread() if that's it. But then, that's just a guess...good luck.