I can't believe how astonishingly hard this is to understand but to fix also. The problem is simple (I'm having it to right now on my new XP SP2 install). It is a problem only of display, ie: visual. Whereas on most machines, the ZIP files only show up on the right-hand pane as regular files, now they are showing up on the FOLDERS view, as folders also, so it makes the display look strange, as it basically shows the zip files as folders on the left, but they are really just WinZip files. I had this problem in years past, and remember it was a pain to fix. When I un-register that dll above, the zip folders go away temporarily, but then I loose my WinZip association, and "compressed folders" is back. As soon as I re-associate with WinZip, the folder appear on the left hand (folders) pane again, as well of course as always being on the right-side files view.
