I don't no if it needs that, perhaps not if it is working other than these blocked entries you mention.
I don't know why you might have this in your HOSTS file ?
Did you put it there and is there anything else in the HOSTS file ?
I fear the latest version of ZA free is bloated as well 35MB download with lots of trial ware which could cause issues if the AV element is active. Allied to that and the free version is crippled as far as protection goes, I would look at a different firewall.
Zone Alarm free works fine with avast and has a reasonably friendly user interface, however, the free version is becoming bloated with trial ware and is also crippled as far as outbound protection goes In the Program Control, configuration area, the slider will only goes as far as Medium protection, if you want more you have to buy the Pro version.
Check out the performance of ZA Free in this leak test review,
http://www.matousec.com/projects/windows-personal-firewall-analysis/leak-tests-results.php later set of results.