Yeah Launchbox should either let you navigate through the extracted folders to the file with some dialog box, or search for specific file extensions and just let you pick from whatever it finds that matches that criteria (if it finds more than one. if only one file matches the criteria it could just pass that one) for this work, and be useful in other scenarios.
Another thing I like to do is keep games with several discs (final fantasy VII, VIII, IX, etc) in one 7z for each game. For example, Final Fantasy VIII.7z would have all 4 discs inside it. When Launchbox decompresses it, it would be nice for it to let me choose which file to pass as an argument.
Or if I have the same game, but of different regions inside a single compressed file, i'd like to be able to chose which one to pass to the emulator.