For a point to point journey, the system can guess if you've gone via Zone 1 if the line goes through Zone 1 - for example if you travel from Shadwell to Dalston Junction on the Overground, there is only one route to do so, and it goes via Shoreditch High Street, which is in Zone 1, so the system will purchase you a Zone 1 single with your prepay balance automatically.

However, if you take an unusual journey this is not the case. If you set foot in Zone 1 you need a Zone 1 ticket. Simple as that. If you do not have one, you risk being prosecuted for fare evasion.

I'm not sure how to explain this further without digging out the National Rail conditions of carriage and TfL's own fare advice, but I assure you (as someone who is a huge transport geek) that this is the case.