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It happens in the EVF/screen on the back, zoomed in or not. You can set it so that it automatically zooms in when you move the focus ring, or you can use the button to zoom in.
This is correct - you can use focus peaking with the EVF or LCD, and it appears whether or not the image is zoomed.
What I like to do is use the OVF, and manual focus. I leave the auto manual assist (whatever it's officially called, the feature that automatically zooms when you turn the MF ring) OFF, and to focus I'll use the AE/AF button to lock auto-focus, and then if I want I can flip either the front switch to go to EVF and see the full image with peak, or I can hit the rear command switch to go to zoomed EVF with peak. Allows me to use the OVF 99% of the time, adn either zoomed or unzoomed peaking when I want.