When you use the Expand command, it places all the files in the same folder.

When you type Expand /?, you receive:

Microsoft (R) File Expansion Utility  Version 5.1.2600.0                              Copyright (C) Microsoft Corp 1990-1999.  All rights reserved.                              Expands one or more compressed files.                              EXPAND \[-r\] Source Destination                              EXPAND -r Source \[Destination\]                              EXPAND -D Source.cab \[-F:Files\]                              EXPAND Source.cab -F:Files Destination                                -r            Rename expanded files.                                -D            Display list of files in source.                                Source        Source file specification.  Wildcards may be used.                                -F:Files      Name of files to expand from a .CAB.                                Destination   Destination file | path specification.                                              Destination may be a directory.                                              If Source is multiple files and -r is not specified,                                              Destination must be a directory.
You can use the Cabinet Tool, installed from the Support Tools folder of the CD-ROM.

When you type cabarc /?, you receive:

Microsoft (R) Cabinet Tool - Version 5.1.2600.0                              Copyright (c) Microsoft Corporation. All rights reserved..                              Usage: CABARC \[options\] command cabfile \[@list\] \[files\] \[dest_dir\]                              Commands:                                 L   List contents of cabinet (e.g. cabarc l test.cab)                                 N   Create new cabinet (e.g. cabarc n test.cab *.c app.mak *.h)                                 X   Extract file(s) from cabinet (e.g. cabarc x test.cab foo*.c)                              Options:                                -c   Confirm files to be operated on                                -o   When extracting, overwrite without asking for confirmation                                -m   Set compression type \[LZX:  -p   Preserve path names (absolute paths not allowed)                                -P   Strip specified prefix from files when added                                -r   Recurse into subdirectories when adding files (see -p also)                                -s   Reserve space in cabinet for signing (e.g. -s 6144 reserves 6K bytes)                                -i   Set cabinet set ID when creating cabinets (default is 0)                                -d   Set diskette size (default is no limit/single CAB)                              Notes                              -----                              When creating a cabinet, the plus sign (+) may be used as a filename                              to force a folder boundary; e.g. cabarc n test.cab *.c test.h + *.bmp                              When extracting files to disk, the <dest_dir>, if provided, must end in                              a backslash; e.g. cabarc x test.cab bar*.cpp *.h d:\test                              The -P (strip prefix) option can be used to strip out path information                              e.g. cabarc -r -p -P myproj\ a test.cab myproj\balloon\*.*                              The -P option can be used multiple times to strip out multiple paths                              When creating cabinet sets using -d, the cabinet name should contain                              a single '*' character where the cabinet number will be inserted.