The 0 profit square root rule is used because it errs on the pessimistic side and requires no further assumptions about the system. Otherwise one had to calculate the system expectancy, which however in turn depends on DD, so we would get a loop of iterations that does not always converge.

The square root rule is nowhere built in in Zorro, except for drawdown normalization. Aside of that it's just a recommendation in the manual. What you do with it is completely up to you and your script. The same goes for reinvesting, taking out profit etc.

One Z12 with $15K or 3 Z12s with $5K are the same risk.

Z4/Z5 are indeed exceptions insofar as the drawdown is limited by the price cap. It won't grow with the square root of time. So you could theoretically remove all profits. Still, there is no hard limit in the other direction, so it's more safe to treat Z4/Z5 like any other system.