I have a typical reporting application:
Large report <-- HTTP Compression --> ASP.NET Web Server <-- ??? --> SQL Server 2008
Since I have so much (repetitive) data to send to the client, I would like both network hops to have compression.
Is there a transport-level compression setting for SQL Server?
no, there isn't. The TDS data stream is somewhat compressed but that's it. If the db to web server presents a real problem then consider adding caching for relatively static data. no need to prematurely optimize this.
The standard data transfer is optimized between your DB and application. If you think you really need a more efficient solution, you could build a CLR function inside your SQL Server that will compress your data. That way you will (1) reduce the bandwidth between the websever and db server and (2) via pre-processing inside the db server, you can lower web server processing by just streaming your pre-processed data through your web server and to the Request.