A standard! A standard!

[Suicide Junkie]

It seems to me the only two methods that would make sense are:

1) extract to SE4 directory
2) extract to new modfolder in SE4 directory.

#1 is safer as long as the zip follows the standard.
#2 is safer as long as the user remembers what he has to do, and works no matter what the zip's format is. (At worst, you'd need to move the files wholesale after unzipping)