Emulator

Game Name?
Game ID? (right click the game in the game list, Properties, Info tab)
MD5 Hash? (right click the game in the game list, Properties, Verify tab, Verify Integrity button)

Not game specific, reproduced on Super Mario Sunshine and Metroid: Other M (come on, I really just wanted to try out Maxximum Edition, so that's why I needed extraction to begin with).

What's the problem? Describe what went wrong.

When using Filesystem -> Extract entire disk (maybe other extraction options too, untested) files are put in incorrect directory structure.
This also prevents extracted game from being launched in Dolphin, giving black screen for Wii and weirdness for GameCube.

Additional directory entries are produced, making paths longer than needed. See attached screenshot for ISO vs extracted fs of SMS, since it's easier to show than explain.

What steps will reproduce the problem?

1. Extract the game using "Extract entire disk..." option
2. Look at its directory structure, or, better yet, try to run extracted dump in Dolphin

Is the issue present in the latest development version? For future reference, please also write down the version number of the latest development version.

Yes, tested on Dolphin 13098.

Is the issue present in the latest stable version?

Untested, but it worked correctly at some point in 5.0+ releases.

If the issue isn't present in the latest stable version, which is the first broken version? (You can find the first broken version by bisecting. Windows users can use the tool https://forums.dolphin-emu.org/Thread-green-notice-development-thread-unofficial-dolphin-bisection-tool-for-finding-broken-builds and anyone who is building Dolphin on their own can use git bisect.)

Unknown, can bisect in free time if it's really needed.

If your issue is a graphical issue, please attach screenshots and record a three frame fifolog of the issue if possible. Screenshots showing what it is supposed to look like from either console or older builds of Dolphin will help too. For more information on how to use the fifoplayer, please check here: https://wiki.dolphin-emu.org/index.php?title=FifoPlayer

Comparing SMS ISO vs extracted fs:

What are your PC specifications? (CPU, GPU, Operating System, more)

KUbuntu 20.10

Is there anything else that can help developers narrow down the issue? (e.g. logs, screenshots,
configuration files, savefiles, savestates)

Nope