Image not zooming in or out in Photos

Consider to use the Preview.app aa an external viewer. Select the thumbnail of the photo, then use the command "Image > Edit with" and select Preview. In Preview you can use the View menu to set the size to "Actual Size" or the keyboard shortcut ⌘0 .

Only by making the photos window smaller.

Well photos can do that. You just have to live with an oversized view for low resolution images.

Bear in mind it is a photos app. Most photos will be large enough (bigger in pixels than your window) not to have this problem.

Well yes - that is a compromise you'd have to accept. But (in my opinion) hardly the end of the world. Especially when only relevant for very low resolution images.

On the other hand, if it is a serious problem for you, then absolutely - you should select an app that better meets your needs.

Ah yes - well that is the nature of the beast. In my 40 odd years of using computers, I am yet to use any software that isn't annoying in some way or other.