For Virtual Products available through download, your Product settings should be:
PHP Code:
Product is Virtual: No, Shipping Address Required
Always Free Shipping: Yes, Always Free Shipping
Products Quantity Box Shows: No, Do not show Quantity Box
The logic is bit backwards I know, but setting Product is Virtual to "NO" -- even though it is Virtual -- will apparently, allow Zen Cart to not reduce Stock levels; which is logical for downloadable products. Then, the Always Free Shipping overrides the requirement of a Shipping Address.
Not sure how many Downloadable products you have but they must all use the above settings.
Note: using the above settings does give a msg. in Red text when updating your product but that is normal.