Microsoft's Win32 API maximum file path length (MAX_PATH = 260
characters; see
http://msdn.microsoft.com/library/default.asp?url=/library/en-us/fileio/fs/naming_a_file.asp). This is confirmed by the fact that if I extract
your ZIP file to my root drive (I:) everything goes just fine.

The longest path in your ZIP file is 186 characters long:
"atlassian-jira-professional-3.2.1-standalone\atlassian-jira\WEB-INF\cla
sses\com\atlassian\jira\web\action\admin\issuefields\screens\ConfigureFi
eldScreenScheme$DefaultIssueOperation.class". This means that you cannot
extract the ZIP file to a destination path that exceeds 74 characters
(260 - 186 = 74). I got the error when I wanted to extract it to a new
folder on my desktop. The total length of the path of that folder was 87
characters, which was too long.