I don't know that I would go so far as calling it cruel, but zoos certainly make me feel uncomfortable for the reasons you have mentioned. I feel particularly sorry for the animals there who have to endure climates and seasons which are very different to their natural habitat.
An additiona point is that before the advent of easily accessible cinema, it was hard to find out about these animals. Now that there are so many excellent films and shows depicting animals in their natural habitat (usually with a great commentary by a qualified zoologist), I feel that these trump the value of having animals caged in a zoo. For example, you can see how animals would actually behave in the wild on film - this is not necessarily the case at the zoo. Maybe the making of excellent wildlife shows might start the demise of the zoos?!
Anyhow, that's my point of view. I'm keen to hear what other people have to say, whether for or against zoos and to hear their ideas on the future of zoos.