In a previous post, Increase maximum size of List Template, I explained how to increase the maximum file size of a list / site template in SharePoint. However, even after doing that you may encounter another error when trying to save the template: 'Failure decompressing data from a cabinet file'.
The resolution to this is to use stsadm to do the export (and subsequent import), and specify the attribute -nofilecompression.
stsadm -o export -url http://yoururl/youroldsite -includeusersecurity -nofilecompression
-filename C:\yourdirectory stsadm -o import -url http://yoururl/yournewsite -includeusersecurity -nofilecompression