The above work was being done using HP DesignJet T7100ps driver.
when I changed to the HPGL2 driver things get better.
(As I understand it, the HPGL2 driver is used for vector and has a limited amount of options to play with. Apparently those options include plotting a pdf file that contains vector data on top of an image background.)
You can add as many pages as you wish to your atlas and design each accordingly to your need. If you want to have a first page with the title and a second page with an overview map (not controlled by atlas) and starting from page 3 your atlas, just add a first page with text only and a second page with a new map element. Here, just don't activate the "...
This is a bit old. But for people looking for the answer, this is now handled by a report rather than a map composition.
You can reduce the size of the output PDF with for instance Ghostscript (gs) after the Atlas has been generated. You can also reduce the Export resolution (the default is 300 dpi) to for instance 100 dpi in the Layout-> Export settings.
I don't know if there are other "compression" settings available for layouts.
Update: The ...