eWeek: Virus attack surmounts AV Defenses

Did you see this article “New Virus Attack Technique Bypasses Filters”? (1/31/2005 in eWeek)
I’d really like to know what antivirus vendors were so incompetent that they couldn’t scan inside of the rar compressed format.
Was this caused by people not scanning all files?
Was it the usual case of virus defs being a reactive protection measure?
Was the antivirus software unable to look inside the rar format?
Is it really new for viruses to be inside rar file? I could have sworn mydoom was doing that back when antivirus vendors failed to protect us from password protected zips.
If you you must take action each time the enemy thinks of a new attack, you’re AV solutions obsolete.