Does 7zip compression level affect decompression speed?

As I recall, 7-Zip decompression takes about the same amount of processing regardless of compression level -- the difference is in how much memory is used during decompression (mainly due to the size of the dictionary). However, in the "store" case, there's no decompression to do at all, so that's obviously going to be significantly faster than any actual decompression case.

That said, if you mainly want an encrypted folder, you're probably better off using a TrueCrypt container, as archives are not designed for frequent updating. But if you insist on using 7-Zip, at least make sure to create a non-solid archive.

I have just conducted a test using a 4.2G ISO of a PS2 game and there is negligible difference in decompression times (and size too) between the default 7zip compression and ultra:

Default:

Size:       4411064320
Compressed: 3135355831
real    4m55.908s
user    3m46.838s
sys     0m5.811s

Ultra:

Size:       4411064320
Compressed: 3118958337  
real    4m57.601s
user    3m45.949s  
sys     0m6.265s

(Ultra settings used: -m0=lzma -mx=9 -mfb=64 -md=32m -ms=on)