Timoz,
The "zones" shipping module operates by building "Geo Zones". I expect (just from memory, which is not too good this afteroon), that the shipping module is matching countries to its zone definitions (remember, they are really entries in the geo_zones database table) using the ISO code to do lookups. -- ie, find the country, then find a geo zone which holds it using the zone_country_id field in the zones_to_geo_zones table.
No real provision is made for geo zones smaller than a state.
I suspect what would have to be done (as a custom hack) is add additional entries to the zones table (per city, town, village, etc), use the "Tax Zone" tool to cluster them together, and write a module which could then use some identifier to do the lookup based on the zone id's.
David