Yes we use freearc here as a pipe for other compressors.
If you really just want to get rid of the 2GB limitation of those bin files, there is also the possibility to use just 7zip and make a SFX archive, but then without inno setup.
If you want to have inno setup as an installer, use
DSG and use 7zip lzma2 compression or go with something other methods if you want to achieve better ratios. Then get a installer script which is compatible with DSG, like this
https://www.fileforums.com/showthread.php?t=103408