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Images in Zip file = Reduced Quality

No. Data gets replaced on extraction. If that weren't the case, any time you archived data, it would get corrupted. Jpgs don't really compress anyway. They're already compressed. The zip is only for convenience of moving multiple files.
 
Zip is a lossless compression format (ie. no quality/data is lost during compression, merely converted to 'kind of shorthand', and when unzipped the resulting file(s) are identical to what they were before being compressed), whereas say JPEG is a lossy compression format so data is lost when converted to that format.

You can search for 'lossy' and 'lossless compression' to read up more about this. Learning how the JPEG format works is quite interesting IMO.
 
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