Hi Steve,
The curious part about the story was that it only happens if you navigate the tree in a particular way.
If you navigate the folders from the right hand view in Explorer it did not happen.
Also I'm very interested to hear if this helps Dr Gary as he has not confirmed nor denied yet that this is his problem as well.
Hopefully you'll be able to reproduce the problem now as I would love this to work without any guest customization required (even while I think my windows vista and higher guests will now have to live without this integrated zipfolder support)
--
Wil