Yes - it's a mistake, that option was (iirc) last seen in Moodle 1.9.
I'm not entirely surprised - compressing files is a CPU heavy activity. You will need to make sure that the maximum execution time is set appropriately. FWIW, it's not my favourite part of Assignment - it would be nice to be able to select the files to download rather than just *all*.
Do I also need to mention that you are running an old, unsupported version and there may have been improvements and fixes in newer versions?