So when DZ was first created, long before all the machina was lost and technology destroyed, (because this did not happen instantanously), things like the Airship were commonplace. I find it hard to believe and entire city could exist and nobody would notice.
Firstly, I'd reckon Yu Yevon wrecked lots of havock with Sin before summoning DZ and programming Sin to periodically wreck havoc.
And there had been a war, so people were probably more busy rebuilding stuff than going on adventure trips and randomly bumping into DZ.

Secondly, the greates technological city, Bevelle, had sworn themselves as priests of Yevon so as to avoid his wrath, so I doubt anyone from Bevelle would be allowed to make statements that hurt Yu Yevon in any way. So even if some random Bevelle citisen flew out and spotted it in the ocean, when he came back to tell, he was probably ignored and imprisoned.

Which brings me to my next point: if someone came back home from a boat trip raving about having seen Zanarkand(I'm guessing that Sin would have fully destroyed machina before people started forgetting what it looked like and all), who would believe him? In everyones eyes, Zanarkand had been flattened to the ground in the war. He'd probably be ignored, just like we would probably ignore someone who claimed to have seen Atlantis.

So with Sin lurking about, Bevelle being Yu Yevons slaves, and everyone thinking Zanarkand was destroyed, I don't think the likelyhood of the city being found and made public are very great.

As for DZ being in the bubble, I'll grant that it is certainly possible given the circumstances, but I personally believe DZ to be "lifesize" simply because I don't like to assume more than absolutely necessary.