well, I definitely wouldn't call her retarded, but she is not the brightest person for sure, and it is not only about Zach stuff, but in gemeral.
I know I am probably gonna start a mess here, but..
you said smth about sheltering, this gives my some vibes of Rapunzel story, Rapunzel was locked in a tower for her whole life and yet she had some common knowledge/sense, yes she was naive, but not that naive. Was Emma locked the whole her life? - NO, she went to school/college, had few friends (at least from what I remember, I played it long ago) and yet while looking pretty mature, mentally she is probably on a level of 12th year kid most of the times, yeah, she has her moments here and there, but only on a very rare occasions, and that's why I don't consider her as a LI in this game, cause it feels like I am gonna corrupt and take advantage of a child, which makes me feel uncomfortable. maybe it will change in future, who knows.
I remember your discussion in Little Regina thread, and I can tell you that even though Jessie looks like a Loli, she is way more mature/wiser than Emma. But that's only my humble opinion.
anyways, forgive me, Emma fans
on the other hand - less competition for you