I'm not sure how to get the archive tool in the OS working again, but would highly recommend using a third party tool such as 7-Zip (http://www.7-zip.org/) or WinZip (http://www.winzip.com/index.htm) instead of the OS version.  7-Zip is an open source application that has been working flawlessly for me for a long time and it supports just about every archive type out there so it's a nice one-stop-shop.