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What is the difference between HDMI compressed and uncompressed modes? My understanding is that in compressed mode the TV handles the decoding. Is this right?

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The TV still has to translate the color information and format, so there is, in effect, still some decoding on the TV. The difference is that it is uncompressed. The output from the device matches whatever the source captured, in whatever image format the source uses, but there is no loss of detail from applying compression.

Compressed requires vastly lower data rates and is easier to transfer to the TV, but the quality is substantially lower. Uncompressed requires a high quality source and a very fast data connection, but also provides the highest possible quality as the signal is not compressed with lossy compression schemes.

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