I was able to get the image to compact using SCP when running nxos.7.0.3.I7.2.bin. But not when running nxos.7.0.3.i4.8a.bin. Make sure you have enough room in bootflash.  To get nxos.7.0.3.I7.8.bin installed I first had to install nxos.7.0.3.I7.2.bi...