File-roller has an unintuitive manner of extracting files when navigating to parent directories of the current one. When you go up in your directory hierarchy in the extracting-location chooser, the subdirectory that you have just got out of will always be highlighted, and File-roller will use it for extracting.
This is confusing because the files you have just extracted will not be in the directory that you wanted to extract them to.

Steps to reproduce:
1) Move an archive to some subdirectory, ie. /home/user/Desktop
2) Click on Extract
3) Click on a name of a parent directory (or parent's parent) to change to this directory (ie. /home/user/)
4) Click on extract
5) The files will be extracted to a subdirectory of the directory you wanted to extract your files to (here: Desktop instead of /home/user).
See attached screenshots.
I've tested it on a deeper file hierarchies (ie. /home/azrael/Desktop/test0/test1/test2/test3) and it always behaved the same.

I'm using Ubuntu 9.04 (Gnome 2.26) but this bug appeared in at least 2 previous versions of Gnome.

Other information: