In my German-speaking opinion, Zersiedlung is more about destruction of landscape than about fraying of settlements. You don't say that a village is zersiedelt, you do say that a landscape is zersiedelt.
You are right. "Zersiedlung" is a term of art in land-use and development planning to describe the undirected expansion of settlements into rural areas. I happen to work in the periphery of planning and approval and the term comes up quite often. The English equivalent would be the mentioned "suburban sprawl".
