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The patch is reversed: usually, diff is invoked as "-c old new".

I think it is almost right, but I have a few remarks:
- by tradition, open() should have a mode argument,
defaulting to 'r'; it would be ok to raise exceptions if it
is anything else. However, do consider implementing
universal newlines; allowing 'b' as a no-op might also be
reasonable.
- I wonder what happens if the compression rate is < 1. It
would appear that the code might use too few rawbytes. I
suggest to recursively invoke read in this case.
- I wonder whether it could ever happen that there is still
data to uncompress in the zlib object, ie. whether it might
be necessary to invoke .flush() after exhausting the
rawbytes (and discard the zlib object afterwards)
- it appears that atleast the builtin file object implements
.read(0) as returning an empty string; the manual says that
the entire file is meant only if size is omitted or negative.