I am looking for excuses to upgrade, lol.

I have never been impressed with the footage shot from the 1080i FX1 even after deinterlacing.

Is there much of a difference in compression algorithms and/or footage quality shot with the same settings between the Z7U and the older FX1?

Compression algorithms, no.

Footage quality, yes, huge, due to the vastly superior chips and glass.

In my opinion, based on my experience with the FX1 and the Z5, which is pretty similar to the Z7.

One of the main issues I have with the FX1 is even slow tripod pans causes the footage to go fuzzy, even with image stabilization turned off.

The Z7 is absolutely better than the FX1. The chip that the Z7 uses is a smaller version of the Exmor that you fing on the EX1 and EX3. The Exmor chip is far better in low light and colour temp seems (no facts to back this up though) a lot better. The lens also, while no real pro piece of glass, it still looks more pro when compaired with any of those Z1 FX1 etc cameras. There is, if you really use the biggest aperture possible, the beginings of a pro dof.
We use the Z7 all the time for everything from broadcast to weddings videos. Although if you have the money an EX1 and nanoflash really is very impressive

Wow just seen the F3 with the Exmor chip.

depends what you shoot because i got an FX1 and a EX1 (supposedly far superior), but the 3CCD of the FX1 (one of the latest with this technology) give me often better picture than the EX1.
I would never exchange my FX1 for a Z5 or a Z7, perhaps for an EX1r

I think the Z7 will give you improvements with the progressive vs interlaced.

But I would say unless you still want the minidv recording, I'd look at the Sony EX1 or Panasonic AF100. EX1 if you want a great video camera. AF100 if you want shallow DOF & don't have the cash for a Sony F3.

Or just get an external recoder: AJA Ki Pro, Nano Flash, Sound Devices Pix 220 / 240, Atomos Ninja... Higher quality codec = higher quality picture.