Thank you for the feedback, everyone. I don't envision it as a replacement for PNG, which has features Sxz isn't designed for, gamma correction, CRC, built in compression, fast encoding and more.
An image with a hole allows it's other pixels to not have to carry an extra byte to render transparency allowing for good compression for oddly shaped images. Same reason Sxz supports paletted images with more than 256 colors, hopefully allowing for greater potential compression where PNG and WebP switch over to TrueColor. Most corporate logos use 256 colors and a white background. Why not just remove the background and increase the quality of the image with more colors?
SVG isn't pixel perfect like PNG. Amongst icon content creators, they avoid SVG in order to have precision. Although SVG has good integration with a browser's DOM, while PNG and JPG are merely data blobs. Since Sxz breaks down to chunks, it can potentially be parsed by browsers into DOM nodes allowing CSS interaction.
The target audience would be game developers in highly constrained bandwidth markets such as mobile and browser based games and want PNG's precision with additional features and don't mind the slow encoding.
I will generate more documentation if there is continued interest.