HDR Files are similar sizes between compressed raw and standard raw.

When you merge to HDR, the raw files are demosaiced to linear RGB and then merged. As long as the pixel size is the same, it does not matter if you use compressed raw or standard raw, because both will be converted to the same size linear RGB file.

No. 

I did test out running Convert to DNG using Lossy Compression, but it actually created larger files. 

Assuming you're happy with the process, you could always render the files and get rid of the HDR work fiile. If you have the Raw files, it can be recreated and the settings could be saved as a Preset if space is really that much of an issue.