Why wouldn't it be "Droga jest przed domem"?
It could be, and my guess is that if it was an ENG to PL translation, it would be accepted. But that's not the construction the course creators chose for this sentence.
Could it be that "Z przodu" is an adverb, while the preposition is "Przed"?
More or less. I think that "z przodu" would be called an adverbial phrase, but that's not really much of a difference.
What can I interpret the "z" here to literally mean? Is przodu the genetive of przód here?
Yes, Genitive. Hmmm... maybe "from the front" will be helpful in understanding the construction?
the road is in the front of the house seems acceptable.