Yea it works like that, you're supposed to use as low source volumes as possible and max volume level on ZO if you want the cleanest possible output. The lower the source volume the more bass boost it can take before distorting. Think of a "preamp" slider on an EQ. The volume control on your source will work similarly. Probably it has to do with ZO being such a different solution compared to your traditional amp, the ZO is a full analog process while most amps in this bracket are digital. I think that's partly why I like the sound of ZO so much because I like that "analog" sound. Quite a few EQs have analog and digital filter options and I tend to lean towards the "analog" filter ones because the digital while probably being more "accurate" on an objective basis sounds more sterile in comparision. To me analog just sounds more natural.
This is why I also think ZO benefits quite a lot from having sufficient power behind it to so you can go lower on the source, I can notice signs of that already comparing ZO2.3 vs ZO2.1 (the ZO2.1 appearently has higher gain as it's a bit louder). But I don't know, it's just a guess, it doesn't explain how in low gain you can go high on the volume without distorting though but then again in low gain it's less bassy too.