The mask amounts to basically a Clark Kent in glasses level disguise

At least with the Anthony Hopkins Zorro in this film. When he confronts Don Rafael at the beginning and speaks to him there's no way that his identity would be in question. If Don Rafael was previously acquainted with Don Diego, which we can assume he was, as soon as Zorro confronted him that closely in proximity and spoke to him in his natural speaking voice Rafael would have immediately known who he was. This is probably how he figured out who Zorro actually was.

It would seem that Zorro's mask isn't designed to conceal his identity in such close proximity. If he was fighting enemies and constantly moving too quickly for them to properly assess his facial features then it is possible his identity would remain unknown.