It’s really amazing how they pulled off Zork for micros. I think it took up ~1MB of memory on a PDP-10?

That's why they split the micro version into Zork I, Zork II, and Zork III. The original version had all three.

I know it was a cross platform virtual machine, but Did it actually interpret byte code and not just text?

Yes. Z-machine specifies a table of 256 opcodes. Developers write code in ZIL (Z-machine Implementation Language), a text-based source code. The ZIL is then compiled into a byte code program consisting of those 1-byte opcodes as well as arguments and static data.

The are new games made for the zmachine since the 90s.