This procedure is quite simple and the following is done on Linux. When you have an uncompressed IOS, you don’t need to wait for it when it comes to loading it on Dynamips.
unzip -p c3725-adventerprisek9-mz.124-25.bin > c3725-adventerprisek9-mz.124-25.image
You can see both compressed and uncompressed versions below.
Workstation IOS # ls -ltrh |grep 3725
-rw-r--r-- 1 root root 38M 2010-11-29 16:47 c3725-adventerprisek9-mz.124-25.bin
-rw-r--r-- 1 root root 79M 2010-11-29 20:23 c3725-adventerprisek9-mz.124-25.image
Workstation IOS #