Extracting flavor from lemon zest
The flavor of lemon zest is in the oils contained in the skin, the best way to extract them is to mechanically extract them, steeping in hot water isn't going to do much for you. 

First, grate the zest using the finest microplane grater you can get, the more surface are you have the better. Second, you need to crush and/or grind the zest to get the oils out. If you are using sugar then a great way to extract flavor from the zest is to crush the zest into the sugar, the sugar acts as an abrasive and grinding agent. You can do this in a mortar and pestle if you have one, or if you don't using the back of a spoon to crush it into the side of a bowl works pretty well too. If you aren't using sugar then crushing still works, just not quite as well. You want to keep crushing until you have a strong smell of lemon coming from it, then crush a little longer.

Once you have your sugar and zest crushed up you can add it to hot water and mix .