tv beta guy,
Someone could have been twiddling the v-height/linearity controls in back of the set. I've seen this cause vertical foldover as well as a reduction in vertical height of the picture. I would check those adjustments before digging into the circuitry. If you must go into the set, be sure you have the schematic.
The picture looks good even with the raster distortion, but that's Zenith for you (or was, before Gold Star got into the act). Most Zenith TVs from the beginning until the '90s were excellent sets. The original Zenith Radio Corp. of Chicago really knew how to build good TVs. I've had several in my life (still have a nearly-ten-year old Zenith 19" color set that works absolutely great on cable), including a non-digital version of your 12" portable (bought in 1978, it lasted over 20 years and was still working when I finally got rid of it four years ago). I've liked them all. Very few repairs required on any of my Zeniths (none, yet anyhow, on my Zenith color set

), but again, that was a hallmark of the company in its pre-GS era. Too bad "the quality went out" when the company was sold and went offshore.