Ultimately the Zimmerman Telegram was half-hearted in its intentions, at best. Germany didn't really suffer under any illusions regarding Mexico's likely response, it was primarily a vain hope that the Mexican leadership would prove to be gullible and greedy. Obviously, they hadn't counted on it being intercepted and turning into a foreign relations debacle.
Even the most nationalistic and expansionistic Mexican ruler would be able to see that invading the U.S. was complete suicide. There really wasn't any kind of parity between the two militaries, and while the armed border populations wouldn't be able to blunt the invasion all by themselves, they would likely be able to inflict uncomfortable and frankly embarassing losses on the advancing Mexican Army. In order for this scenario to occur it would take either an incredibly stupid Mexican ruler (one likely to be promptly disposed of by a coup for his gross incompetence), or a much earlier POD that allows for a more viable Mexico.
Given such a scenario, I don't personally believe that the U.S. would annex any Mexican territory, with the one possible exception of Baha. More likely the U.S. would simply dictate harsh terms, probably including a demilitarized border.