In my experience, the range and amount of magnification to use is highly dependent on the terrain and seasonal conditions. Early in the fall, there's so much brush and so many leaves that it is rare to be able to see anything that you aren't right on top of. In the early season, a shotgun or a .22 with open sights is what I use, and I generally have decent luck stalking. Well, maybe stalking isn't entirely accurate, but walking around deer trails I usually see them either real close on the ground, or hear them moving away and then see them when they go up a nearby tree. Sitting still can work, but if the woods are thick, it can be annoying to sit in one place and hear squirrels 50 yards away but never be able to see them through the leaves...
Later in the season, when the brush dies off, and the leaves start falling off the trees, I'll switch to a scoped rifle, and I'll be more likely to walk out someplace in the woods and sit for a while and wait for them to start moving around. I've used 4x fixed power scopes, a 3-9, and I recently got a 2-7 that I'm going to try on a .17 HMR.
Zero range will depend on what caliber you are shooting; basically it will come down to figuring out a zero range that you can live with.
With a .22LR, there are so many different cartridges with different velocities available, that there is a pretty significant variation in the drop at distance. Once you have a type of ammo you are comfortable with, try shooting at 25, 50, and 75 yards (no scope adjustments between, same dead-on hold for each). A 3 inch spread seems to be the usual rule of thumb for squirrel hunting, so for example you may find that setting your scope so you hit 1.5 inches high at 50 yards leaves you 1.5 inches low at 75, so you should be set for a dead-on hold out to 75 yards.
As far as head shots vs body shots go, I've done both. Honestly, squirrels usually don't sit still for long and they can so easily slip behind cover, so if I'm presented a good shot, I take it.