Hmmm..... To be honest I think you are better off decompressing the files into a directory. I have not tried it your way but I can imagine even if you get it working (god bless if you do) it would have some serious load issues and would most likely decompress it into a temp file to begin with (for instance, when you insert a divx in xbox and run XBMP it copies it to temp file and plays.)
Anyway, Wish I could have helped more but good luck
LepPpeR