There's a progression or escalation of sorts involved, but the isolator does solve the single point of failure issue that kept me from even considering the Z-system for cave diving use.
I spoke with Andrew at DEMA a couple years ago and got the impression that the Z system was originally designed to provide a means for a clean, DIR configured hose routing and back up reg for single tank monkey diving. It does that pretty well, but it obviously also had potential for two tank SM diving as well in terms of allowing a standard DIR hose configuration. The problem was that a second stage freeflow would leave you basically screwed as both regs are plumbed into the (non isolated) distribution block. To resolve that risk, you needed to:
a) add in line shut offs to each second stage, and they add 3 additional dynamic o-rings each, two of which are very prone to damage from sand and salt crystals, and damage to just one of them leaves you open to gas loss. So in effect the additional items needed to mitigate the risk creates even greater risks of their own (not a viable configuration plan); or
b) bring along a separate QD hose and second stage assembly to plug into one of your SM tanks in the event of a second stage failure - and that plan still leaves you without a wing or drysuit inflator. I can live without a wing inflator, but the lack of a DS inflator can be problematic in a cave profile where I have to descend significantly to exit the cave. And the emergency second stage assembly sucks up an entire pocket where it lives under used, often sandy and silty and with unacceptably low odds of actually working if ever needed. (Another non-viable plan.)
Consequently, the isolated distribution block resolves that single point of failure problem and now does allow a true DIR hose configuration with the isolation and redundancy needed to make the whole thing work. However the isolated Z-system still adds a degree of complexity that most SM divers just don't feel is needed. In effect it's an issue of playing the DIR tenet of a consistent hose routing on the team against the tenet of not bringing along anything you don't need to keep things simple and minimizing failure points.
That aside, the whole Z-system idea gets much more controversial again if you now decide to use the Z-system isolator manifold for technical two tank diving AND use it for your gas switches. With a gas switch using a Z-manifold and an isolator to plug in the deco gas, you've now got two tank valves and an isolator valve involved and are now using what is a very non standard gas switch protocol. Given the number of technical divers who have died due to incorrect gas switches, that's just not acceptable to me. And, even if you get past that, your deco gas system has now went from a very simple tank/first stage/second stage system to a tank/first stage/QD/manifold/second stage system.
Personally, I found that the long/short hose issue on mixed teams was much more easily resolved by just diving with a 5' hose on each tank and thus passed on the Z-system concept. However if I dove it, I'd use a standard stage/deco bottle configuration rather than try to plug it into the Z-system.