Hello I'm back with a report. Good news and bad news.
Last night at the Amiga club I finally got around taking a look at this problem. It involved a new install of OS4 as well as the A1 HD had been taken out and used as a PC RAID drive. Why someone would want to cause suffering to hardware like that I don't know but fortunately another HD was found and put in place.
So once installed I set about setting up the ZIP and ZIC DOS drivers. I found that was quite easy. I set up the device and unit. Ended up rebooting and then inserted a ZIP. It mounted straight up! Makes me wonder why it didn't fail to mount for me as per the subject. It was a 100MB disk and formatted as FAT from what I can tell. It came up as ZIC, the PC driver, with a volume named Empty. ZIP, the FFS driver, showed it as invalid. Good news!
Now, bad news.

I tried to copy some files and I started getting errors. Common was device error 20. I then tried to fast format which failed and then a full format which failed even worse. I then got nonsense errors such as "Volume exceeds partition length" and "Object not of required type".

I checked the settings and max transfer which seemed okay.
But then...
Spektro wrote: If you want to use a1ide.device, you have to turn interrupts off.
I tried this and it made all the difference! Thanks so much for the hint.
The only problem now is that turning off interrupts also kills of the CDROM on the same bus. HD is unit 0. CD is unit 2, ZIP unit 3. UBoot detects it but when OS4 loads up there is no CD0 driver. Caused me a load of confusion. Checking cables and what not. So it looks like interrupts for one device can affect another device on the same bus. As you could see putting the ZIP drive on its own bus would be an easy fix.