Learn docs how to do it.

Also, Florian DANIEL aka Facyla is created some docs on the french. Perhaps, you can find some usefull information in there.

I'm not sure what exaxtly you are referring to with image compression. Do you mean the creation of the image thumbnails with some optimized settings with regards to image quality/filesize? If so, I'm not sure (though I think rather not) that Tidypics has this functionality in the version compatible with Elgg 1.8 as I think i've added it only later and never backported to the older version.

With regards to upgrading from v1.8.0-rc1 to the latest version of Tidypics compatible with Elgg 1.8 it should be no problem as the image files itself will not get touched. Only some changes in the database are most likely necessary (as done by the upgrade scripts that come with Tidypics - and it should show you on the Tidypics plugin settings page if updates are pending). Nonetheless, I would advice to backup your data directory and database before upgrading as there might even go something wrong when changes are done in the database.

Apart from Tidpics I would definitely advice to upgrade to a more recent Elgg version as soon as possible. Beside Elgg you would also need compatible versions of your plugins, too, to be able to upgrade (I had not the time yet to upgrade all my own plugins to work on Elgg 3 yet). Whereas Elgg 1.8 (and up to Elgg 1.12) gets no support anymore Elgg 2.3 is still supported and would also work with PHP 7 (whereas PHP 5 has reached its end of life, too).