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Maybe you downloaded the MMS file in zip format to begin with? Cab files are often zipped up to save space. If you open up the zip file from your PC do you see the cab file inside? If so, extract it and then copy the cab file you extracted over.
If not, I'm not sure what's going on. But I can tell you one thing for sure--activesync will never convert a cab file to anything else. Windows Mobile devices live and breathe cab files so activesync knows to keep them as-is. Try it again (maybe with a different cab file) and see what happens.
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