Use mp3's and not only will you get compression, you can put a lot of music on a CD.
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I have a similar problem with some classical CDs in my car--all that great dynamic range means that ppp sections just disappear in the road noise. Never had that problem with cassettes taped off LPs!
I can't say for sure, but my guess is that CD burning software will not suffice for this, and you will want some audio processing software which goes beyond the usual noise-reduction designed to clean up digitized vinyl. Can't help you with specific recommendations, however, as I haven't tackled this one myself yet. Are you using Wintel or Mac?
Careful on the MP3s--you're talking about two different kinds of compression. MP3s and other codecs are doing data compression. What you want is dynamic compression--raising the soft parts and lowering the loud parts, so to speak. A good MP3 should not do that--it should sound just like the original, assuming you use a high bit rate. I've never heard that reduced dynamic range was one of the artifacts of lower bit rates, though I don't have enough experience with them to say for sure.