If you open an archive (which includes subfolders!) in XnViewMP by double-clicking, everything works fine. You can also navigate into the subfolders.
However, if you go back/up one level, at first all thumbnails are blank and if you double-click on a file, you get a message box "file: <compressed filename>". But the image preview does work.
The thumbnails reappear, either if you do a refresh (F5) or wait some seconds (4-5 seconds in my case).
See below screenshot for illustration; you can use my test-zip-file if you want: https://www.mpy.de/pub/xnviewmp1b3_test.zip
I tested with ZIP and RAR archives, both show the same behavior.

OS: Linux / Archlinux
Version: XnView MP Linux, Version 1.0 64bits (Apr 13 2022), Libformat version 7.110