Last time I saw this SharePoint behavior.
In this scenario, you receive an error message like:
"Failure decompressing data from a cabinet file."
Interesting behavior... lets look deeper why this can happen? This error can occur even though the template file (*.stp) is smaller than the value that was specified in the Stsadm.exe command. For example, this error can occur if the .stp file is smaller than 500 MB.
The max supported size for a template is between 25 to 50 MB depending on the file compression.
More details you find in this KB 960969.
Um why did Microsoft include this stsadm command if.....it doesn't work?