Thanks for adding the clarifications
One little nitpick:
It's not Windows 7 specifically that does this, Windows has a setting that's usually on by default (I believe, correct me if I'm wrong,) that hides file extensions for known file types.
Pretty much, Windows sees that you have a zip file. It knows what zip files are, so it doesn't show you the .zip portion of the file name, if that setting is enabled. From there, you'd push the update.zip to your phone, and it would be named update.zip.zip - all because of Windows.
By turning this off (in a folder view, Tools -> Folder Options -> Uncheck 'Hide extensions for known file types') it will stop this stupid feature