ZIP file in Panther are handled by a little CoreServices helper called BOMArchiveHelper. It seems to be a bit screwy.
I was just trying, for the first time, to unzip some files on Panther. I had a couple transferred from a PC with extension ".ZIP" (in caps), and they showed up in the Finder as ZIP archives. When I double-clicked them, though, BOMArchiveHelper attempted to compress the file into a "CPGZ" file.
I eventually deduced that if I changed the extension to lower case (.zip instead of .ZIP), then BOMArchiveHelper will unzip it properly (and speedily, I might add). So the Finder recognizes ".ZIP" as a ZIP archive, but "BOMArchiveHelper" doesn't? Is this supposed to be this way, or an obvious bug? How does BOMArchiveHelper decide what to do with a file? I looked in its info.plist, but couldn't really figure it out.
It's also somewhat annoying that the BOMArchiveHelper window tends to show up behind the Finder window, so when you double click the file, you get *no* immediate feedback that anything is happening unless you know to go searching for the progress window. And it doesn't show up under the Finder's "Windows" menu, so no help there; I've been using Exposé to find it sometimes.
It's nice to have the ZIP support in Panther, but I think it could use a bit of cleaning up. And yes, I will report this to Apple.