At present we have no inclination to allow it. Many end users don't know what the heck to do with a .rar file. Can you imagine how they'd react to a .7z file? Just a bad plan all around.
On the other hand, .zip is an old standard and is built right in to Windows. Pretty much anyone that plays LotRO is going to know how to use .zip
As for the file size - rofl, that's not large at all, trust me. On some of our other sites we've got packs that are 45+mb.