Duke, I ran into the same issue. After trial and error I found.
The <add key="CuteChat.DisableZipCompress" value="true" /> needs to go on line two of your web.config file immediately below the <configuration> tag. I tried it every where else in there and would get errors. It now works for me. It loads slightly slower, probably to be expected I would think as it looks like we are turning off the compression when the app downloads or starts. Below is what it should look like.
<configuration>
<appSettings>
<add key="CuteChat.DisableZipCompress" value="true" />
</appSettings>