Get the latest chdman.exe from the MAME development site or use the built-in tool in PCSX2 nightly.
Add the -cc zstd flag (if using newer CHDMan) for the highest ratio: chdman createcd -i "game.iso" -o "game.chd" -c zstd:lzma:cdzl high compressed ps2 games
A: Using 7z with Ultra settings, you can get it down to ~1.8GB. Using CSO level 9, ~2.3GB. You cannot go lower without re-encoding the massive 6GB of video files. Get the latest chdman