Essentially using Ext.ajax to load a large file will return a Status of 0 on Android 2.2. It works fine on Android 2.3 and above though. I know this is a Ext issue as if I switch over to jQuery $.ajax and load the exact same file it works without a problem.
It would be nice to not include jQuery into my application but for now that's the only way it will work loading large local files with ajax.
I hope this post will help some people but if you are trying to build for android 2.2 using Sencha you will have a problem because your app.js will likely be larger then 1MB. Android 2.2 will attempt to compress this and break. You will receive an Error reading "Data exceeds UNCOMPRESS_DATA_MAX"
My work around was to rename app.js to app.jet and fix the reference in my index.html file also JUST for android builds. This is stupid, but it works. Only files listed on that website for NO compression will work over 1MB.
Again this is ONLY Android 2.2, as 2.3 has fixed this problem. You will need to do this for any files in your www folder that are larger then 1MB and do NOT have a extension listed on that page.