Something to point out:

It's likely that Ultimecia is the only one who can survive Time Compression because she casts the spell in a way so that all of time EXCEPT her own personal timeline is compressed. People might be drived mad before TC is over, but it seems more likely that people can't exist because all of the events that make up their life is compressed into a single event in time. In effect, they'd be frozen in time.

The reason Rinoa can 'exist' when she finds Squall is because time compression was never completed, so when she finds Squall, time is de-compression, making her live easily. In other words, the place Squall is is NOT a time compressed world, if it was, Squall wouldn't exist when Rinoa got there. It is merely some sort of timewarp which Squall gets stuck in due to the de-compression of time.