Unless it's full color sandstone you don't need to zip it. Are you converting the file from sketchup? Shapeways can't use the native .SKP files. You can add on an STL exporter to sketchup (it's free)
I have done quite a few HO scale models- there are many in my shop and more on the way. I have found that meshlab (it's free) does a very good job of scaling down the model. I design full size in sketchup. keeping in mind the minimum free and supported wall dimensions, as well as free and supported wire size- I actually have an excel cheat sheet I made up for different printing materials. If you want it PM me.
After sketchup I open the model in Netfab (free) and convert units from MM to inches as there seems to be some kind of bug in the Sketchup STL export function, then run an auto fix function and resave the STL.
Then it's onto meshlab where I center the model, multiply it by .0115 in the scale feature to make it HO, freeze the mesh, and save it again. There is a way to save macros in meshlab that makes this repetitive step much easier.
Sometimes I use the netfab website to repair the model after scaling it down to HO. I do not scale down with netfab as I find it does weird things to small objects.
Lastly, if I am assembling several models into one larger STL for upload I use Blender (also free).
Isn't that a straight forward work flow? And it only took a year of messing around to get here. I suspect there is a better way to do things, but so far I am sticking with my system because it works- and it is all free software. Of course at this point I might buy something if it made a significant difference.
And of course this is only for STLs. It's all different for full color sandstone.
I'd be happy to share any insights or offer any help I can. Send me a private message and we can either email, skype, or use an old fashion telephone.