Alger Hiss - It is not as directly circular, but it still is. It's a bit too meta to have people in a genre story be aware that they are in a genre.
I don't in any way think they have to be aware they're in a genre. There are hundreds of years of legends and folklore about zombies before we ever got to movies.
If you saw a man turn into a wolf would you call him a werewolf, or would you make up some gay name for it? Skinshifter? Hairmorpher? Manimal?
Authors want us to believe their characters as real people, and real people would know what to call a shuffling guy who rose from the dead, or someone who drinks your blood and can't go out in the daytime, or turns into a wolf. I find stories where they do that much more convincing. Salem's Lot, for example. Even goofy stuff like The Monster Squad or Lost Boys. Everyone knows what vampires, zombies, mummies, werewolves, etc are, and when characters in what is otherwise presented as the "real" world don't use those terms, it rings hilariously false.
"Just re-read a couple early issues (where they were on Herschel's farm) - he called them "zombies" repeatedly..."
"If they know they're called zombies then they know that you turn from bites and they die from head shots. Takes away the fun if they already know what they're dealing with."
Nah, just because they fit the description we all know -- undead people -- doesn't mean that the real-life version exactly fits the folklore/pop culture one down to weaknesses etc.