Thanks for the reply!! I found the answer I was looking for. I knew I had read it somewhere, but could not remember. Found it again while revisitng the http://www.tweaktown.com XP Tweak guides.
Tweak #7 - ZIP Folders
A really quick tweak... Windows XP has built-in support for .ZIP files, so that you can view them as normal folders. However, the system uses a sizeable portion of resources doing this, so disabling this feature can increase performance. It's easy to do, you just have to un-register the zipfldr.dll, by going to Start -> Run... and typing
regsvr32 /u zipfldr.dll
then pressing Enter.
A good read if you are into Tweaking XP and I assume everyone here is