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Steam downloads can cripple even a high-end CPU, what you're seeing is nothing we don't all experience.
Congratulations, that doesn't change what I said.
Do you think there's an option in Steam's settings to disable downloads while playing games because Valve thought it was a fun idea?
Steam downloads being compressed is a myth. Steam doesn't compress the data, the games' devs do that. Compression can range from great for some 2D Unity games at like 70-90%, to 50% for some Source games like L4D2/TF2 to almost nothing with CoD, where the game's like 115GB installed and the download is 108GB. Steam doesn't and can't magically compress files.
The only thing Steam does is encrypt preloads and I don't know if regular downloads are encrypted or not, but there wouldn't be a reason to in my eyes. But what definitely isn't correct is that downloads are compressed by Steam. OP either downloaded a highly compressed game or something funky is going on.
Downloads barely affect the PC's performance. The real answer here is that you don't want a download wrecking your latency. Unless you're downloading very specific titles nothing will happen to your in-game performance. I always have downloads running while I am playing SP games and there's literally no performance impact, and I am on an ancient system.
2. Busy regional DL server
Can't recall what you should do for #1, but if #2 is the issue you can just change DL region via the settings and try out other regions. It's worth to go to a place where it's currently night or morning.
A dev may compress their game but Steam does compress the data.
https://partner.steamgames.com/doc/sdk/uploading
I currently have an issue with my Steam library's highlights sticking for seemingly no reason, after I've already hovered off the title. Could've very well just been a weird bug you had.
Are you being serious or trolling because you can literally see the difference between the downloads size and the install size on the downloads page lol
Then the option would say "pause downloads while playing online" Xbox can do that, Sony only pauses downloads when playing online, why would Steam limit access to thousands of single player games if they were worried about latency?
Do you have Valorant (or prob. LoL) installed on your system?