Where was Shinji Matou during Fate/Zero?
Shinji was overseas at the time. He is only mentioned by his father Byakuya in the original Novel.
He was briefly mentioned by Byakuya in the original Fate/Zero novel, his only child was sent overseas in the name of studying.
Source: Shinji Matou - Other Appearances
Why did Zouken need Sakura if he had Shinji?
The original reason Zouken adopted Sakura was because Shinji was inferior as a magus due to their declining bloodline and wasn't fit to be an heir. Shinji stated in the Fate Route that this was because the Matou didn't properly adopt to the land, as they were foreigners to Japan, unlike the Tohsaka.
Furthermore, since having two heirs would weaken the inheritance (magic) that is to be passed down, and raising both as magi is always believed to cause conflict between the siblings down the track (as was the case with the Aozaki family), the Tohsaka's, like any other magus family, can only choose one heir.
Because the Tohsaka's and Matou's were ancient allies back from when the 3 families were tutored by Kischur Zelretch Schweinorg, Tokiomi Tohsaka put Sakura up for adoption to the Matou.
Like most magi, her father chose only one daughter to carry on his family's tradition as he believed raising an additional child would introduce competition. Zouken Matou, an ancient ally of the Tohsaka House, offered to adopt Sakura with the intention of training her as the successor of the Matou's magecraft as his own heir, Shinji, was incapable of sorcery.
Source: Sakura Matou - Background
The reason why Rin was chosen over Sakura was because Rin's Elemental Affinity was all five, while Sakura's was Imaginary Numbers. However, it was during her "training" which forcefully changed her Elemental Affinity to Water (Matou standard) that Zouken saw her potential as a Master.
As for Shinji Matou being a Master, he was a fake Master. From the beginning, Sakura was the Matou's Master. The book Shinji is shown to hold when he commanded Rider was the Book of the False Attendant, which was created from one of Sakura's Command Spells. Because the book cut Rider's Prana supply from Sakura but didn't change the source to Shinji, Rider needed other ways to gain Parana to stay manifested, thus the set up for Blood Fort Andromeda. Sakura made the book for Shinji to use, as she did not want to fight in the War because
- She could hurt Shirou (at that time, she was not aware that he had become a Master)
- She would hurt Rin (despite being told by Zouken to think of her former family as dead, she still recognized Rin as her sister)
Sakura was only forced to fight in the war in the Heaven's Feel Route when Shinji splashed something on Sakura during the Blood Fort's activation, causing the worms inside Sakura to go crazy. This forced her to fight in the war and put an end to it, lest she be consumed by the worms.