Got this at annoyances.org:
How do I turn off Windows XP's built-in support for ZIP files?
Intended For
Windows XP only
By default, Windows XP treats ZIP files like folders. If you're not familiar with ZIP files, this can be convenient.
However, if you've already got a utility in place to manage your ZIP files (such as WinZip), this new feature can just get in the way. For example, Windows will search inside ZIP files when using Search - For Files or Folders, a process that not only causes searches to take longer, but one that may cause incomplete information to be displayed in the In Folder column of the search results.
Naturally, Microsoft hasn't provided any easy way to turn this feature off. Here's how to do it:
Select Run from the Start Menu.
Type regsvr32 /u %windir%\system32\zipfldr.dll at the prompt, and click Ok.
The change will take effect immediately, but you may have to restart Windows for all traces of the built-in ZIP support to disappear.
If, at any time, you wish to re-enable Windows XP's built-in ZIP support, just follow these steps:
Select Run from the Start Menu.
Type regsvr32 %windir%\system32\zipfldr.dll at the prompt, and click Ok.
The change will take effect immediately, but you may have to restart Windows for all features of the built-in ZIP support to be available.