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Two, never use your zoom on your digital camera. I am not sure about your pixels on the camera you mentioned but if it is under 4 mega pixels, each time you zoom, you are actually losing little bits of information. This is why you should always work from the source photo instead of retouch, or resaving any image that was a jpeg... the old copy of a copy thing applies here.
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Actually, you're partially correct about the zoom on digital cameras.
Using zoom on a digital camera is fine. It's just like using zoom on a regular camera. There won't be any distortion or anything.
Digital zoom however is different. Most digital cameras have a small margin called digital zoom. Basically after you've used optical zoom to it's fullest extent (i.e. 4x), it then has the option of using the digital zoom (i.e. an additional 2x).
Digital zoom is the act of zooming in on the image file rather then zooming in on the actual image in front of you. So when you've increased the zoom by 4x you have the option of enlarging that image by an extra 2x. Basically, it would be doing the same as increasing the size of an image in photoshop and then cropping it back to 800 x 600 or whatever you have it set at.