Office Docs Download as Zip files?

It's all about Mime Types

The problem is Mime Types on your webserver, The document is being served with an unknown mime type so the webserver passes it on to the browser which then tries to figure out what type of doucment it is. IE often gets it wrong and tries to deliver it as a zip archive.

If you are using Apache, you can add the mime types for all MS Office 2007 documents, by adding these lines to your virtual host or .htaccess files.

AddType application/msword .doc
AddType application/msword .dot
AddType application/vnd.openxmlformats-officedocument.wordprocessingml.document .docx
AddType application/vnd.openxmlformats-officedocument.wordprocessingml.template .dotx
AddType application/vnd.ms-word.document.macroEnabled.12 .docm
AddType application/vnd.ms-word.template.macroEnabled.12 .dotm
AddType application/vnd.ms-excel .xls
AddType application/vnd.ms-excel .xlt
AddType application/vnd.ms-excel .xla
AddType application/vnd.openxmlformats-officedocument.spreadsheetml.sheet .xlsx
AddType application/vnd.openxmlformats-officedocument.spreadsheetml.template .xltx
AddType application/vnd.ms-excel.sheet.macroEnabled.12 .xlsm
AddType application/vnd.ms-excel.template.macroEnabled.12 .xltm
AddType application/vnd.ms-excel.addin.macroEnabled.12 .xlam
AddType application/vnd.ms-excel.sheet.binary.macroEnabled.12 .xlsb
AddType application/vnd.ms-powerpoint .ppt
AddType application/vnd.ms-powerpoint .pot
AddType application/vnd.ms-powerpoint .pps
AddType application/vnd.ms-powerpoint .ppa
AddType application/vnd.openxmlformats-officedocument.presentationml.presentation .pptx
AddType application/vnd.openxmlformats-officedocument.presentationml.template .potx
AddType application/vnd.openxmlformats-officedocument.presentationml.slideshow .ppsx
AddType application/vnd.ms-powerpoint.addin.macroEnabled.12 .ppam
AddType application/vnd.ms-powerpoint.presentation.macroEnabled.12 .pptm
AddType application/vnd.ms-powerpoint.template.macroEnabled.12 .potm
AddType application/vnd.ms-powerpoint.slideshow.macroEnabled.12 .ppsm

Note: These new formats are included in Windows 2008 running IIS 7.0 by default.

For more information on the mime types associated with MS Office 2007 documents, take a look at this blog entry from Microsoft's VS Office Developer Blog.