I was arguing you can use a standard codebook (some agreed-upon top-N list) instead. I imagine if you did you'd lose a couple words ("wherefore" springs to mind, as it's not in common English usage) but by and large you'd have just about everything.
Technically, you can also have a lossless JPEG (or at least, within epsilon), but that's not why it's done.
More importantly, the entropy of English text isn't really that high -- ~ 1 bit per letter -- which means lossless compression works pretty well on it. Images less so.
The lesson here being that compressing English text as suggested in the article is rather meaningless, and can be done much, much better. When the article asks at the end:
> We're sensitive to data loss in text form: we can only consume a few dozens of bytes per second, and so any error is obvious.
> Conversely, we're almost blind to it in pictures and images: and so losing quality doesn't bother us all that much.
> Should it?
My answer is "mu". I wanted to answer "no", but that would mean I even accept the question as valid.
EDIT: s/in this way/as suggested in the article/ for clarity.
I agree with you that the article misunderstands compression and coding in general I just couldn't quite figure out what one of your counter-examples was about.
Maybe I'm misunderstanding what you're saying but if you're compressing adaptively by building a dictionary of the target material, 64k words would give you lossless compression of Shakespeare - the unique words in the collected works (with some wiggle room for 'word forms') are in the 30-40k range.