An ongoing saga ...

Well, the problem with the nice script is that Yummy doesn't invoke a bash shell, so the script never gets executed.
Can't your provider set the login directory of your shell access to be the same as the ftp login directory (or vice versa)? This would be the most obvious solution.
When Yummy sends the zip command it is preceded by a cd command. The cd command sets the current directory to the path of the selected file to be zipped according to the FTP server. So, for example:
Your server listing has a file : 'testfile.txt'
Your server's current FTP working directory is : /downloads/files/
Yummy will connect via SSH, send:
cd /downloads/files/
then send:
zip testfile.txt testfile.txt.zip
One option would indeed be to add a new setting to Yummy's Bookmark which specifies the difference between FTP path and SSH path and this is a request that has come up once before for this very same reason. I have it on my To Do list for some time, but I can't say when it might be added.