The stock camera app offers digital zoom, 2x or 4x. Useless if you are shooting at full quality, but it's in there. The DROID camera has a fixed focal length length, there is no hardware zoom possible. This is typical for all cheap and/or ultra small cameras: cellphones, "Flip" style pocket cameras, and your cheaper P&S models.
I am using (evaluating) Camera Magic and while it does offer some nice features and I like its interface when you zoom the image on the screen does not zoom so you never really know what you are going to get.
BTW, I wonder if anyone knows of a camera app that allows you to set the ISO?
Hazy.. there is no hardware zoom because the lens does not have the capability. It has nothing to do with "cheapness"... The design of the phone would have to be overhauled to allow the lens to move and not be stationary.