I'll run some of my own experiments on this today, but I'm initially concerned about color muting. Specifically looking at the cat's eye example, in the bottom of the pupil area there's a bit of green (reflection?) in the lower pupil. In the original it is #293623 (green) - in the libjpeg it is #2E3230 (still green, slightly muted). But in the Guetzil encoded image it is #362C35 - still slightly green but quite close…
In general if you want to avoid any color changes in blobs a few pixels in size, you’ll want to take it easy on the compression, and take the hit of a larger file size in trade. I suspect that if you give this algorithm twice the file size as a budget, that green color will come back.
It would definitely have its uses as such. Or maybe it's great all around and I just found one bad example?