Yes, AES is currently not supported, it requires a new decryption algorithm. It's certainly possible but the problem at its core is that particular cipher mode that Winzip are using is not supported intrinsically in .Net 2.0 I went thru of the Winzip pages and as I said in this post
http://community.sharpdevelop.net/forums/p/155/19830.aspx#19830
" had a go at decrypting an AES-encrypted WinZip file. Getting hold
of the encrypted content stream was straightforward as the doco on the
winzip site was correct, and the existing SharpZip code easy to
modify. I then tried using the RijndaelManaged class in .NET 2.0. The
problem is that WinZip are using AES in CTR mode (counter mode) but
this is not a supported cipher mode in the RijndaelManaged library. "
There are a number of ways you can "run" AES. CTR mode is quite a good choice for a winzip file. I don't know why MS didn't include this mode. The source for the .NET libraries is available so maybe someone with a head for XOR'ing 16 byte blocks could have a crack at it.