First it will be better if you have a Linux environment and change user to root.
Always copy the .tar.xz file to /home/user folder to avoid any hard link conflicts.
Let the file name as distro.tar.xz and file path /mnt/c/MyFiles.
It is important to use --hard-dereference
option with tar command with sudo.
cp /mnt/c/MyFiles/distro.tar.xz ~
cd ~
mkdir /tmp
tar -xf distro.tar.xz -C tmp/
cd tmp/
tar -czf ../distro.tar.gz --hard-dereference *
cd ~
mv distro.tar.gz /mnt/c/MyFiles/
rm -rf tmp/
Let the file name as distro.squashfs (or in some cases distro.SFS)
and file path /mnt/c/MyFiles. Here also it will be better if you copy
the file in an Linux environment and change user to root.
cp /mnt/c/MyFiles/distro.squashfs ~
cd ~
unsquashfs -d tmp distro.squashfs
cd tmp
tar -czf ../distro.tar.gz --hard-dereference *
cd ~
mv distro.tar.gz /mnt/c/MyFiles/
rm -rf tmp/