I have also tried 7-Zip, but it didn't work on the network folder either. I am able to create a zipped folder on a network drive and move files there to be zipped, so this is a workaround until I find the solution, but I really prefer the above method. The message says: 'The Compressed zipped folder is invalid or corrupted. I am able to zip the same network folder with XP, but not with Win 7. You can help protect yourself from scammers by verifying that the contact is a Microsoft Agent or Microsoft Employee and that the phone number is an official Microsoft global customer service number.

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