Suppose I have a directory which contains another directory with a name "dir". In this case, "create archive" cannot create an archive with a name "dir.zip" in that directory. In such a case, When I click on "Create" button on the dialog to create an archive with a name "dir.tar", the dialog changes the path into the subdirectory "dir" rather than creating "dir.tar".
The OP did not say which archiver he is using, but I ran into this problem with file-roller. Looking into it, it's not a thunar-archive-plugin issue, but a bug in file-roller. It looks like the bug was fixed in file-roller 3.6.3 and above...
Closing invalid.