What file to email for upload to intranet server? story or zip file?

It is not a problem with SL, it is a problem with how it is being made available. Make sure you are publishing for web. Make sure the web person is extracting it from the zip. The most likely problem I can think of is that the extracted files are being placed where those who need them do not have access. The files must be placed in a location where all learners have R/W access to every file and every folder.