When you try to increase the max file upload size, have you selected the right web application? MOSS 2007 starts with, I think, 3 web apps by default. Make sure that you selected, from the little yellow rectangle in the upper right, the web application that you extended from. Most likely it is "Sharepoint - 80". After selecting it, go back to the Web application general settings and change the upload size and you should be good.
For the blocked files, again make sure you have the right app selected, then go to the "Operations" section. From there, click "Blocked File types", it should be in the first column, first section, and I think its the 3rd to last item in that section. That will bring up an editable text field that has all sorts of file extensions that are blocked. Search for the exe, zip, and whatever else and delete them, then click OK 