C2 is basically just a snapshot of the settings that were active in the camera when you chose to save that state as a "Custom" setting. If your camera won't do something in any of the other modes now that it will do in C2 it just means the applicable setting has been changed since the time the current C2 profile was recorded.
The basic menu option to enable or disable Digital Zoom is found by pressing the Menu button, navigating to the Shooting tab (the one with the camera symbol) and selecting Digital Zoom. You can then select from Standard or Off.
As outlined on pages 230-231 of the Powershot G1 X Camera User Guide, digital zoom is only available in certain shooting modes and not available in others. It is not available in the following shooting modes: SCN-High Speed Burst HQ, SCN-Handheld Night Scene, SCN-Stitch Assist, or any of the Image Effects (Creative Filters) modes.
There are other notes spread throughout the User Guide that describe certain features that are not available when other menu items are selected. A thorough reading of the User Guide after a problem is encountered is sometimes needed to find and isolated note that tells of the limitation.
One such note on page 56 says that digital zoom is only available when the 4:3 aspect ratio is selected. If any other aspect ratio is selected digital zoom is not available.