Hi OP,
The circuit in question is quite common and used in lots of stuff like lamp dimmers. The key is to make sure there is no way that the user can ever come into contact with any part of the circuit. This means it is definitely possible, plausible, doable, and has been done, used, and reused countless times in circuits.
If on the other hand you have the idea that the circuit is "isolated", then you could find yourself in series trouble. It's indeed isolated, but only for DC not AC, and certainly not for transients.
For example, call one side of the line 'live' and the other side 'ground', connect a small capacitor (rated for AC voltage usage) that hasnt been used in a week and connect it to the power line 'live' side. Connect a 100 ohm resistor to the cap. Using a switch, switch the open end of the cap to ground. As the switch is closed, there could be more than 1 amp peak in the cap and resistor for the time it takes to charge up to some DC level. Some time after that the circuit will function like an AC circuit, but still wont be isolated.
The voltage from the zener to ground is only say 12v, so touching that and ground may not give you a shock. But if the AC input connections are reversed (as they often do become) then the live side is 'ground' and touching the top of the zener and earth ground (wet grass, damp floor, cold pipe, etc.) and you get more than a 100v shock.
So yes, this circuit is doable and usable and has been used for a long time and is still being recommended by lots of big companies, but only for people who know how to deal with the isolation problem and know for sure that there definitely is no isolation that could be taken as pure isolation like that you get from using a transformer with an isolated secondary.
That said, you can use the circuit once you understand how and why it is NOT truely isolated, but until then you really should not do it. Best bet is to purchase a wall wart. If you insist on using the cap, it may give you the proper current level or it may not depending on the load and cap value, but you should be aware that there is definitely a concern for safety with this kind of circuit.
From your opening statement you seem to be aware of the *possible* problem, but you should really be taking this as a *definitive* problem that needs very strict attention to detail.