Since updating to Mountain Lion, I have two new problems with this.
One, on every extraction, the preferences panel opens and I have to close it.
Two, if I am extracting more than one zip file at a time, I get an error on the second and subsequent files. "Could not extrat the file "{file name}" from the archive "{archive name}": Could not create the folder" This is perhaps related to Dar's sandboxing report above.
If I extract them separately, everything goes as it should