speed site, cacheing and image compression

I have a question about speed site that breaks down into 2 issues. I am building a site on a dev domain, agreatnameforawebsite.com/pdi. The site is loading at an OK speed, but before sending it to the client, I wanted to show the client how the cache works. I installed w3 total cache and adjusting the settings to the recommendations of my host, fatcow. (They claim that these settings are best fitted for thier servers.) However, when I run the site in gtmetrix.com and tools.pingdom.com it says that I do not have cacheing installed on the site. From going to the site on my browser it also does not seem that the cache is on. Please help me figure out what I did wrong, and how I can get the cache working.
The second part of the question is that after I looked at which files were loading the slowest, I saw it was mainly 2 images, which is very normal. I installed smush.it PRO, but to no avail. The images apparently did not compress as they are loading at the same speed. Please help me figure out what I did wrong here also.
Thank you all so much!!