Well said. I didn't mean to imply that you put the circle on the specific body part, but more that you put the circle on the "location" of the Z as far as the game code is concerned (I think. I've had a fair amount of success with this method). I believe the game recognizes the "feet" as the zombies location on the Z(could be wrong) axis when the zombie is standing, and allows for aiming at different parts when the zed is grounded. A programmer I am not, so I can't tell you for certain if that's whats happening, but my playing so far has led me to believe this.
Addendum: You definitely seem to do more damage to prone zombies by aiming the cursor directly at their head, but your character also has to be the correct distance from the target, depending on weapon.