Zuko can't sense heat, only fire, which means he's much more limited in his perceptions than Toph. He's only really able to fight firebenders, which is something he regards as a sick joke. However, he has learned to use his firebending to channel straight up heat into other people if he can touch them or something conductive touching them, like he did with Jet and Jet's swords. Since he let his crew do most of the fighting against the Gaang in this version of season one, they're very surprised when they see him fight his sister in "The Chase".