Thanks for getting in touch! Octopus support packages of a much larger size than you have here. The 404 error you are seeing means that the package is most likely not making it to where Octopus is looking. We have seen in the past that IIS Proxy servers have blocked files over a certain size. The following blog post I found seems to cover this, including the 404 you are seeing.
Let me know if the above helps or if this is not the case. :)