I've encountered this issue before. Have you used the contextmenu manager to hide “Send To > Compressed (zipped) folder”? That might be the cause. I found that once I switched “Send to > Compressed (zipped) Folder” from hidden to visible, the “Compress to zip” option started working properly. It...
That's right, buddy. After testing it myself, I found that once I switched “Send to > Compressed (zipped) Folder” from hidden to visible, the “Compress to zip” option started working properly. It seems these two options actually refer to the same item.