I found the problem.
In the tools, we set type = library.type, but then if (type == "zip") type = "deflate"
However, we later push library.type into the manifest settings, not type. Whoops.
I’ve committed changes to Lime that should help resolve the behavior for the “zip” library, in the meantime, you should be able to use either “gzip” or “deflate” for compressed libraries