In the episode "The Neutral Zone," for instance, it's shown that there were actual Federation (and Romulan) settlements there, which were the first to be assimilated by the advancing Borg.
Naah. The Federation outposts that the Borg have scooped up are only said to be "in this vicinity", not within the Zone. During the episode, Picard never actually moves into the Zone. The Romulans do (Picard: "Commander, you have crossed the Neutral Zone. This is Federation territory."), but it is all forgiven when they explain themselves.
Aha! This is exactly what I'm talking about. The Enterprise arrives at the edge of the Neutral Zone, and then, finding the first outpost missing, presses on in toward the second one (with much tension-filled music, in case we weren't following along).
Geordi even says it right at the beginning: "Captain, those coordinates will take us right into the Neutral Zone," which Picard then confirms after an ominous exchanging-of-glances between everyone.