remember that TC is a magic created by Ultimicia to serve her own precise purpose, so it does not necessarily have to abide by any laws of physics.

Let me explain with a diagram:
The way that time compression could have happened and not felt (experienced) before events on disk 4...

-let E0 represent events before the time Ultimicia traveled (With Ellone's help)

-let the events of disk 1, 2, 3, and the start of 4 (just before TC) be represented by E1, E2, E3, and E4 respectively.

-let Ea represent the moment in disk 4 when time compression 'starts'

-let Ex represent Ultimicia's time

so normally:

E0.....E1...E2...E3...E4.Ea..........Ex

when time compression begins: (i.e. when Ultimicia casts TC)

E0.....E1...E2...E3...E4.Ea......... Ex
E0.....E1...E2...E3...E4.Ea....... . Ex
E0.....E1...E2...E3...E4.Ea..... . . Ex
So Ultimicia stretches the time towards her and then onto her time.
so eventually

E0.....E1...E2...E3...E4.Ea Ex
such that a connection is created between her time and that of Ea

During this moment, Squall and party are pulled through the link and defeat Ultimicia, and as it all happens in the time of moment Ea, time preceding that moment does not experience TC.

Now the reason why the Squall & party from say...2 days ahead in time of Ea did not go ahead and defeat Ultimicia I cannot clearly explain, unless the section of time being compressed actually begins with Ea and ends after E0 (the time Ultimicia traveled to) and that time is warped onto her own time, leaving everything else intact...
something like this:

..........
E0 .....E1...E2...E3...E4.Ea --> Ex