Python ungzipping stream of bytes?

Yes, you can use the zlib module to decompress byte streams:

import zlib

def stream_gzip_decompress(stream):
    dec = zlib.decompressobj(32 + zlib.MAX_WBITS)  # offset 32 to skip the header
    for chunk in stream:
        rv = dec.decompress(chunk)
        if rv:
            yield rv
    if dec.unused_data:
        # decompress and yield the remainder
        yield dec.flush()

The offset of 32 signals to the zlib header that the gzip header is expected but skipped.

The S3 key object is an iterator, so you can do:

for data in stream_gzip_decompress(k):
    # do something with the decompressed data