You are correct. This probably produces something more similar to what you’d want the original command to do, but with better safely:

find -- . -type f -regex '^\./[^/]*$' -exec sh -c -- 'for file in "${@}"; do zcat "${file}" || cat "${file}" || exit; done' sh '{}' '+'

That assumes you want to interact with files with names like .hidden.txt.gz though. If you don’t, and only intend to have a directory with regular files (as opposed to directories or symbolic links or other types of file), using this is much simpler and even safer, and avoids using files in a surprising order:

for i in *; do zcat -- "$i" || cat -- "$i" || exit; done

Of course, the real solution is to avoid using the Shell Command Language at all, and to carefully adapt any program to your particular problem as needed: https://sipb.mit.edu/doc/safe-shell/