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Unpacking zip files is done by /usr/libexec/mc/extfs.d/uzip script (in mc source tree it is src/vfs/extfs/helpers/uzip.in).

This script will run the following command:

/usr/bin/unzip -p FILE.zip NAME_IN_ARCHIVE >/tmp/mc-root/extRANDOM

for each unpacked file. This shouldn't be much slower than unzip in "extract a few files" scenario: at worst, it will be 5 times slower than using unzip to extract all 5 files in one command invocation. I will take a look now why it is slow (maybe processing of huge file list is slow?)

Meanwhile, I have my doubts about that script safety wrt names with spaces,
like "file >/etc/passwd" :(

Copying out one file from 100000 file archive.

mc executes this:
/usr/libexec/mc/extfs.d/uzip copyout /path/z.zip z/f1054 /tmp/mc-root/extfsQmUzPaf1054

which in turn executes:
/usr/bin/unzip -Z -l -T \/path\/z\.zip

which is a command to list all files in the archive. which is slow. which isn't helped one iota by unzip not buffering its output at all and executing three syscalls to output one line:

19:05:52.130997 write(1, "z/f31064", 8) = 8
19:05:52.131100 ioctl(1, TIOCGWINSZ, 0xbfcd8ab8) = -1 ENOTTY (Inappropriate ioctl for device)
19:05:52.131212 write(1, "\n", 1)       = 1

This listing is triggered in zipfs_realpathname() call in uzip:
sub mczipfs_copyout {
HERE->  my ($qafile, $qfsfile) = map { &zipquotemeta(zipfs_realpathname($_)) } @_;
        &checkargs(1, 'archive file', @_);
        &checkargs(2, 'local file', @_);
        &safesystem("$cmd_extract $qarchive $qafile >$qfsfile", 11);
  exit;
}
...

Apparently zipfs_realpathname() is needed to fix some problem with mangled names:

# The Midnight Commander never calls this script with archive pathnames
# starting with either "./" or "../". Some ZIP files contain such names,
# so we need to build a translation table for them.
my $zipfs_realpathname_table = undef;
sub zipfs_realpathname($) {
    my ($fname) = @_;

    if (!defined($zipfs_realpathname_table)) {
        $zipfs_realpathname_table = {};
        if (!open(ZIP, "$cmd_list $qarchive |")) {
            return $fname;
        }
...

.tar.gz archives work even more slowly.

I think fixing this bug requires a serious overhaul of mc's virtual filesystem code.

Not only archive handling helpers need to be better (say, they need to handle filenames with all the weird characters such as newline), but it looks like data structures mc uses to represent list of files are not efficient for millions of files.

I think this needs to be fixed in upstream first.

Closing as WONTFIX.

Please reopen and explain if you think this really is an urgent thing to fix.