Okay, I have followed every piece of advice people have sent me.  NOW,
Squish is doing the following:

When a new compressed packet arrives, it is reading the wrong archive!

Here's what I got last night:

+ 02 Aug 23:22:10 SQSH Begin, Squish/386 v1.11 (mem=98240K - main=00020010)
* 02 Aug 23:22:10 SQSH UnLHarcing d:\Fd\Inbound\4CFDE60E.FR0
! 02 Aug 23:22:12 SQSH Archiver returned errorlevel 3
! 02 Aug 23:22:12 SQSH Archiver command was: "lh32 x d:\Fd\Inbound\4CFDE60E.F
R0 *.pkt /o"
! 02 Aug 23:22:12 SQSH Bad archive:  renamed to d:\Fd\Inbound\4CFDE60E.bR0
# 02 Aug 23:22:12 SQSH Scanning messages from echo tosslog
# 02 Aug 23:22:12 SQSH Can't read echotoss log `d:\max\EchoToss.Log'; scan ab
orted
# 02 Aug 23:22:14 SQSH Linking messages
# 02 Aug 23:22:14 SQSH Can't read echotoss log `d:\max\EchoToss.Log'; scan ab
orted
+ 02 Aug 23:22:14 SQSH End.  Toss=0 (0/s), sent=0 (0/s), mem=98136K

The packets that arrived were zipped.  Squish/DOS takes care of them fine. 
The only thing I have *not* tried is placing the DOS exets. in a directory
of their own.

I'll get back to this all after vacation.

Cheers!

GK

--- Maximus 3.01