Interesting questions. Let start be saying that your observations on the subcategories of groups are correct: if you exclude the empty category all the subcategories of a group are exactly the submonoids of the group (by the way there is a subcategory that is full: the group itself).
About the posets, a subcategory of a poset-category $P$ is a poset $Q$ such that as sets $Q \subseteq P$ (that means that $\text{Ob}(Q) \subseteq \text{Ob}(P)$) and for every pair of elements $x,y \in Q$ if $x \leq_Q y$ then $x \leq_P y$.
That doesn't mean that $Q$ is a subposet of $P$ in the classical sense: usually by a subposet of $P$ one would mean a subset $Q \subseteq P$ with the ordering
$$x \leq_Q y \iff x \leq_P y\ .$$
These subposets correspond exactly to the full-subcategories of $P$.
Finally about the existance of the functor $Z \colon \mathbf{Grp} \to \mathbf{Grp}$, it will surprise you but the answer is no, such functor does not exists.
Here is a proof by contradiction. Assume that such a functor $Z$ does exists, then consider the following group-homomorphisms
$$\mathbb Z/2\mathbb Z \stackrel{f}{\longrightarrow} S_3 \stackrel{g}{\longrightarrow} \mathbb Z/2 \mathbb Z$$
where $f(i)=(1,2)^i$ and $g$ is the projection of $S_3$ onto $S_3/A_3\cong \mathbb Z/2\mathbb Z$.
You can easily see that $g \circ f=1_{\mathbb Z/2\mathbb Z}$ so we should have
$$Z(g)\circ Z(f)=Z(g \circ f)=Z(1_{\mathbb Z/2\mathbb Z})=1_{Z(\mathbb Z/2\mathbb Z)}=1_{\mathbb Z/2\mathbb Z}$$
on the other hand we have the situation shown in the following diagram
$$Z(\mathbb Z/2\mathbb Z) \stackrel{Z(f)}{\longrightarrow} Z(S_3)=0 \stackrel{Z(g)}{\longrightarrow} Z(\mathbb Z/2\mathbb Z)$$
so $Z(g)\circ Z(f)$ should be the zero-morphism from $\mathbb Z/2\mathbb Z$ in itself, which is not the identity, hence we arrived to a contradiction. We have to conclude that the functor $Z$ cannot exist.
Hope this help.