Open /include/utils.php, search for "function setPhpIniSettings()" and find the following lines:
// zlib module
if(function_exists('gzclose') && headers_sent() == false) {
ini_set('zlib.output_compression', 1);
}
disabled/delete those lines and your sugar should work again.
ref: http://www.sugarcrm.com/forums/showthread.php?t=52694
