That's not a stupid question. For a long time I was lulled by the elliptical machine into working out in that "fat burning" zone. It was a lot easier than the cardio zone pace, that's for sure.
But in the end, you are right that it's best to burn as many calories as you can (weight loss is all about calories in vs. calories out). Work out at the highest pace that you can maintain for the length of your workout. You'll be both improving your cardio and burning calories that will lead to fat loss.
There is a thread on this in the exercise forum at
http://www.3fatchicks.com/forum/showthread.php?t=103485 that you might want to check out.