> So how would the Decompress Reader be implemented correctly? Should it use its own buffer that is guaranteed to be large enough?

yes

> If so, how would it allocate that buffer?

as it sees fit. or, it can offer mechanisms for the caller to provide pre-allocated buffer(s). in any case the point is that this detail can't be the responsibility of the producer to satisfy, unless that requirement is specified somehow explicitly

in general the new zig io interfaces conflate behavior (read/write) with implementation (buffer size(s))