Yes, that's ETL. Classic ETL dealt with databases, the modern variant has relaxed this constraint.
As for the zip: We simply "unzip -p" and stream process it carefully (with a custom program reading XML and transforming it). Cuts processing time from hours (extracting the zip and creating all directories, then visiting each file) to minutes (read from a single file).
For unzipping something that crazy, I'm interested in your solution - I think I'd have to write a custom zip library and use a RAMdisk or similar.
1: https://www.safe.com/fme/fme-server/