Ocarina is probably my 3rd-favorite Zelda game, preceeded by Twilight Princess at 2 and Majora's Mask at 1. It still has my favorite Zelda dungeons and bosses, though, and the sheer scope of the game is incredibly impressive for its time. Ocarina also introduced a sense of cinematic presentation and story to the series that we're still seeing the ripple effects of today. One thing, though, related to your discussion of the game: Z-Targeting DOES have a gameplay element: while Z-Targeting Link raises his shield, and it is the ONLY way to have his raise his shield while moving. Otherwise, he just stops in place and you can move his shield around.
As I said, though, my favorite Zelda is Majora's Mask, partly because it is so abstract and inventive. However, the big reason it's my favorite Zelda game is that it's the only one in the entire series that goes to great lengths to make you feel like you are a part of the game world, that the actions you make actually make a difference to the people around you. Throughout the game, you essentially become a citizen of Termina: you follow their movements, you learn their stories and ambitions, and in the end you make decisions that personally impact their lives. And through this, you gain a connection to these NPCs and I can't think of another Nintendo game that does this so well. When nighttime of Day 3 comes around the world comes to an end, you CARE about what happens to the world as the ground starts shaking and the clock tower starts chiming like an air raid warning. THAT'S what I want in the next Zelda game: that connection and the feeling that my actions make a difference, not just Wiimote controls and better graphics.