I think Zaza was working for Altobello, because later when introducing Vincent to Luchesse, Altobello says something like "If we had known he was around, we never would have backed Joey".

This leads me to believe that Altobello is admitting he and Luchesse conned Zaza into the Atlantic City massacre because it would have (theoretically) eliminated Michael and ALL the other dons. Luchesse would then be rid of Michael, and I'm assuming Zaza was promised complete dominion over New York since there would be no other families to go against him (remember, the survivors made deals with Zaza after the hit) except possibly the remains of the Corleone's which wouldn't have nearly enough manpower to go through a real war.