Options for client side zip file extraction before upload
Are you looking for a library for zip compression? You can use SLSharpZipLib on the client side and its .NET counterpart on the server side.
This Should be easily doable with a signed java applet, 90% users will have java installed,if not client can install it.
Signed Java applet will be able to access the file and extract the file you need and transfer it to your server.
This will also be quite fast so even large files will work just fine.
I used this lib by Phil Sturgeon. My files were under 20mb so I can't tell how it will work with your project.