I double click the exe in the zip with winrar. Winrar then extracts all the data and uses it from the zip. I'm now playing it through the ZIP in single player. Strange.
Because the zip utility you happened to use extracted it properly for you.
Windows will normally let you double click things right in the zip file but it doesn't actually extract the files it just hacks the file system to make programs think they are running right but the "current working directory" and other things seem to be messed up in those cases.