Yep, this right here... nothing wrong with what Z did. You want to go super inside to protect? Ok, then I'm going to park my car right next to you and keep you there.
I did this very same thing on the Daily B a few weeks back when it was Gr4 cars at Trial Mountain. Started on pole but lost P1 pretty quick. Guy who was leading, on both straights, would immediately dive to the left/inside of the track and just hold there... like right against the wall, regardless where I was. My thinking was, if you want to protect the super inside that much you can have it and both times I had a run I would just drive right next to him, right off his passenger side door.
As we were getting close to the braking zone he started trying to push me to the outside. The first time, on lap one I gave in and went to the outside giving him some room to do the same & he kept the lead. The second time was on the front straight going into the last lap. I got a much better run off the chicane than him and he stuck to the wall. So I got beside him and stuck to him. Despite him trying to push me over, this time I didn't bite (it was now the last lap after all). At the very last second I cut it right so I could take the racing line and he, well...... like Dose555 said, was bluffing as he didn't really know how to take that turn on the inside he was trying so hard to protect and binned it hard as I went driving by.
Was my first win as an A rated driver so I'll not forget that one.